Exploring Incentive Based Exploring Incentive Based Policy Instruments for Policy Instruments for Achieving Conservation Achieving Conservation Objectives in the Beaver Objectives in the Beaver

Hills.Hills.Presentation to BHI BoardPresentation to BHI Board

June 13, 2007June 13, 2007

Marian WeberMarian WeberAlberta Research CouncilAlberta Research Council

Objectives of the StudyObjectives of the Study Evaluate incentive based policies Evaluate incentive based policies

available to local government to available to local government to achieve ecological objectives in the achieve ecological objectives in the BHIBHI

Build partnerships to further explore Build partnerships to further explore key policy initiativeskey policy initiatives

Municipal Planning Municipal Planning IssuesIssues

How much development to allow and How much development to allow and where to allow it to occurwhere to allow it to occur

How to accommodate growth How to accommodate growth without increasing the amount of without increasing the amount of developed land or overextending the developed land or overextending the infrastructure within their infrastructure within their jurisdictions.jurisdictions.

Municipal Planning Municipal Planning ToolsTools

ZoningZoning Density Limits Density Limits

number and size of subdivision units; number and size of subdivision units; number of buildings per ha. number of buildings per ha.

Limits on Types of ActivityLimits on Types of Activity

ThresholdsThresholds Total number of upgradersTotal number of upgraders Total number of emissionsTotal number of emissions No Net Loss of wetlandsNo Net Loss of wetlands

Conservation Easements, Environmental ReservesConservation Easements, Environmental Reserves

ProblemsProblems Rent SeekingRent Seeking High Administrative CostsHigh Administrative Costs FairnessFairness InefficientInefficient

Market Based ToolsMarket Based Tools Used to Used to supportsupport planning tools planning tools Price Based ToolsPrice Based Tools

Development FeesDevelopment Fees Tax CreditsTax Credits

Quantity Based ToolsQuantity Based Tools Transferable Development CreditsTransferable Development Credits Mitigation BankingMitigation Banking Easements/Purchase of Development Easements/Purchase of Development

Rights (PDRs)Rights (PDRs)

Transferable Development Transferable Development Rights/CreditsRights/Credits

Allow private landowners in areas Allow private landowners in areas designated for conservation to sell designated for conservation to sell development credits to developers in development credits to developers in areas designated for more intensive areas designated for more intensive developmentdevelopment

Private landowners receive the Private landowners receive the financial benefit of development of financial benefit of development of their land while preserving it in its their land while preserving it in its desired state desired state

TDC programs are TDC programs are completely completely voluntaryvoluntary

TDC RequirementsTDC Requirements Identification of sending area(s) to be Identification of sending area(s) to be

protected,protected, Identification of receiving area(s) to be Identification of receiving area(s) to be

developed,developed, Transferable credits that symbolize Transferable credits that symbolize

and quantify the development rights and quantify the development rights being soldbeing sold

An administrative procedure for An administrative procedure for carrying out the transaction.carrying out the transaction.

Identification of Sending Identification of Sending and Receiving Areasand Receiving Areas

Needs to be tied to program Needs to be tied to program objectivesobjectives

More than one goal can be More than one goal can be accomplished by a single TDR accomplished by a single TDR programprogram Farmland, Timberland, and Open Space Farmland, Timberland, and Open Space

PreservationPreservation Corridor PreservationCorridor Preservation Environmental ProtectionEnvironmental Protection Historic PreservationHistoric Preservation Affordable HousingAffordable Housing

Examples Examples (Dorfman et al. 2005)(Dorfman et al. 2005)

Historic PreservationHistoric Preservation TDCs awarded to historic properties TDCs awarded to historic properties

Affordable HousingAffordable Housing Density bonuses can be designed so that builders of affordable rental or owner-occupied 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 housing units receive additional density in exchange for some enforceable mechanism to ensure the built housing is affordable ensure the built housing is affordable

Farmland, Timberland, and Open Space PreservationFarmland, Timberland, and Open Space Preservation Sending area could be AR zones. Sending area could be AR zones.

Corridor PreservationCorridor Preservation undeveloped land along major habitat corridors designated as sending areas; undeveloped land along major habitat corridors designated as sending areas;

Environmental ProtectionEnvironmental Protection Environmentally sensitive areas or area covered by regulations such as stream buffer Environmentally sensitive areas or area covered by regulations such as stream buffer

requirementsrequirements

Receiving areasReceiving areas Selected by any criteria while abiding by other regulatory requirements (e.g. runoff Selected by any criteria while abiding by other regulatory requirements (e.g. runoff

management) management) Typically include commercial and residential zones, including CR zonesTypically include commercial and residential zones, including CR zones

Potential Sending and Receiving Areas for Potential Sending and Receiving Areas for Preservation of Open Space and agricultural Preservation of Open Space and agricultural

landscapeslandscapes

Environmentally Sensitive Areas – Environmentally Sensitive Areas – potential sending areas and credit potential sending areas and credit

allocationallocation Sending areas based on Ecological Sending areas based on Ecological

Functional Zones (EFZs) based on: air Functional Zones (EFZs) based on: air quality, surface water, groundwater, quality, surface water, groundwater, biodiversity (core biodiversity area), and biodiversity (core biodiversity area), and habitat connectivity;habitat connectivity;

Credit allocation based on ecological Best Credit allocation based on ecological Best Practices specific to each EFZ that will Practices specific to each EFZ that will permit the identification of appropriate permit the identification of appropriate decisions and management actions at a decisions and management actions at a strategic level and at specificstrategic level and at specific

Calculating Credits, Prices, Calculating Credits, Prices, and Bonusesand Bonuses

CreditCredit number of TDCs allocated to land owners to number of TDCs allocated to land owners to

sell in the sending areasell in the sending area Based on zoning (1-1 ratio or higher) Based on zoning (1-1 ratio or higher)

Transfer rateTransfer rate number of TDCs required to build an additional number of TDCs required to build an additional

unit of development in the receiving areaunit of development in the receiving area BonusBonus

additional development that can be achieved at additional development that can be achieved at a receiving site through purchasing TDCs a receiving site through purchasing TDCs

Bonus CalculationsBonus Calculations ExamplesExamples

floor area ratiofloor area ratio height height parkingparking landscapinglandscaping subdivision limitssubdivision limits minimum lot areaminimum lot area open space requirementsopen space requirements frontage regulations.frontage regulations.

This flexibility is an important aspect This flexibility is an important aspect of TDCsof TDCs

Balancing Demand and Balancing Demand and SupplySupply

Allocate sufficient TDCs in the sending area Allocate sufficient TDCs in the sending area to keep TDCs affordable for receiving area to keep TDCs affordable for receiving area developers while also offering sufficient developers while also offering sufficient compensation for sending area landowners.compensation for sending area landowners. Potential market for TDCs linked to number of Potential market for TDCs linked to number of

building permits required in a year building permits required in a year Willingness to pay for TDCs – how much are Willingness to pay for TDCs – how much are

developers willing to pay for an additional developers willing to pay for an additional single family unit of housing? Or for a multi-single family unit of housing? Or for a multi-family unit?family unit?

Fiscal ImpactFiscal Impact Tax base follows the creditTax base follows the credit Decrease in development value in Decrease in development value in

sending areas but increase in sending areas but increase in development value for the receiving development value for the receiving areaarea

Property value increases in receiving Property value increases in receiving areas (e.g. 10% - Dorfman et al. areas (e.g. 10% - Dorfman et al. 2005)2005)

Impacts on Affordable Impacts on Affordable HousingHousing

Policies such as TDR programs do not Policies such as TDR programs do not generally help or hurt housing affordability.generally help or hurt housing affordability. Bonuses can be designed to have a positive Bonuses can be designed to have a positive

impact on the supply of affordable housing. impact on the supply of affordable housing. E.g. a TDC could be worth two units of extra housing E.g. a TDC could be worth two units of extra housing

rather than 1 if the units are “affordable,” rather than 1 if the units are “affordable,” Enforcement issues Enforcement issues

Research shows that only exclusionary zoning Research shows that only exclusionary zoning type policies such as large minimum lot sizes type policies such as large minimum lot sizes have negative impacts on the affordability of have negative impacts on the affordability of housing in a community (Dorfman et al. 2005). housing in a community (Dorfman et al. 2005).

Regional ImpactsRegional Impacts Leapfrogging a problem with some TDR Leapfrogging a problem with some TDR

programsprograms Historically not a problem with mitigation banking Historically not a problem with mitigation banking

and development impact feesand development impact fees Mitigation banks instituted over larger regions than Mitigation banks instituted over larger regions than

TDRsTDRs Cross county TDC programsCross county TDC programs

May enhance demand/supplyMay enhance demand/supply E.g. New Jersey Pinelands program spans 56 municipalities E.g. New Jersey Pinelands program spans 56 municipalities

and is managed by the regional Pinelands Commission made and is managed by the regional Pinelands Commission made up of representatives of the jurisdictions. up of representatives of the jurisdictions.

E.g. Boulder County, Colorado allows transfers between E.g. Boulder County, Colorado allows transfers between Boulder County and its cities. Boulder County and its cities.

Administrative Administrative RequirementsRequirements

Calculation method for sending Calculation method for sending areas/areas/

Issuance of TDR certificatesIssuance of TDR certificates Recording TDR TransactionsRecording TDR Transactions Deed of TransferDeed of Transfer

TDC BanksTDC Banks Governmental or non-profit entities created to Governmental or non-profit entities created to

facilitate the exchange of TDCsfacilitate the exchange of TDCs central clearinghouse with information about all central clearinghouse with information about all

available TDRs available TDRs May be given authority to purchase and hold TDCs May be given authority to purchase and hold TDCs

BenefitsBenefits Smooth the trading of TDCsSmooth the trading of TDCs Stabilize the price, and provide additional liquidity Stabilize the price, and provide additional liquidity

to the marketto the market Can speed land preservation by buying substantial Can speed land preservation by buying substantial

numbers of TDCs shortly after initiation of the numbers of TDCs shortly after initiation of the programprogram

Lessons LearnedLessons Learned Programs that are SuccessfulPrograms that are Successful

when demand for development is high and when demand for development is high and market participants are motivated to market participants are motivated to participate. participate.

creation of adequate receiving areas (beware of creation of adequate receiving areas (beware of NIMBY)NIMBY)

Not used to save areas that are under Not used to save areas that are under immediate threat of developmentimmediate threat of development

E.g. land bordering urbanizing areasE.g. land bordering urbanizing areas Land with high development value forces the Land with high development value forces the

allocation of high numbers of TDCs to this land to allocation of high numbers of TDCs to this land to motivate owner participation. motivate owner participation.

Lessons LearnedLessons Learned Programs that have less successPrograms that have less success

developers are satisfied with development developers are satisfied with development densities allowed by the existing zoning codedensities allowed by the existing zoning code

variances allowing greater density are easily variances allowing greater density are easily obtained making the use of TDCs unnecessaryobtained making the use of TDCs unnecessary

developers use other methods for achieving developers use other methods for achieving density such as clustering/conservation density such as clustering/conservation subdivisionssubdivisions

Statutory requirements to hold public Statutory requirements to hold public hearings for transfershearings for transfers

Other InstrumentsOther Instruments Purchases or Development Purchases or Development

Rights/Purchases of Rights/Purchases of Conservation EasementsConservation Easements Conservation Easement Tax Incentive Conservation Easement Tax Incentive

Program (Federal pilot program in US)Program (Federal pilot program in US) New York State Income tax program New York State Income tax program Used in conjunction with TDR programsUsed in conjunction with TDR programs

Other InstrumentsOther Instruments Mitigation BankingMitigation Banking

Developers obligation to mitigate the negative Developers obligation to mitigate the negative impacts of development (wetlands and endangered impacts of development (wetlands and endangered species habitat)species habitat)

When a developer restores a degraded wetland or When a developer restores a degraded wetland or permanently protects an intact wetland, these permanently protects an intact wetland, these compensation wetlands are referred to as credits. compensation wetlands are referred to as credits.

In some regions private entrepreneurs have In some regions private entrepreneurs have started creating wetlands credits that they then started creating wetlands credits that they then sell to developers in need of mitigation credits sell to developers in need of mitigation credits

Transactions are administered through mitigation Transactions are administered through mitigation banksbanks

Other InstrumentsOther Instruments Development Impact FeesDevelopment Impact Fees

Upfront charges applied to new developments Upfront charges applied to new developments to cover the cost of providing public services to cover the cost of providing public services such as roads, sewers and schools. such as roads, sewers and schools.

Purpose: reduce incentives for development Purpose: reduce incentives for development and cover full social costsand cover full social costs

Can be used in conjunction with TDCs - Can be used in conjunction with TDCs - developers who seek additional development developers who seek additional development density are simply required to pay a “sending” density are simply required to pay a “sending” fee which would go to a government agency or fee which would go to a government agency or another intermediary to purchase TDCsanother intermediary to purchase TDCs

Other InstrumentsOther Instruments Tax IncentivesTax Incentives

Use-value assessments Use-value assessments typically used to slow rates typically used to slow rates of agricultural land conversion to non-agricultural of agricultural land conversion to non-agricultural uses by assessing farmland at lower tax ratesuses by assessing farmland at lower tax rates

Mixed views on whether property tax relief is effective Mixed views on whether property tax relief is effective (Simpson 2002; Nickerson and Lynch 2001)(Simpson 2002; Nickerson and Lynch 2001)

Income tax incentives thought to be more effective Income tax incentives thought to be more effective (Simpson 2002) (Simpson 2002)

Potential loss of revenue for municipal governments is a Potential loss of revenue for municipal governments is a barrier to implementation. barrier to implementation.

Provincial grants in lieu to municipalities. Provincial grants in lieu to municipalities. Income tax incentivesIncome tax incentives

E.g. Conservation Easement Tax Incentive ProgramE.g. Conservation Easement Tax Incentive Program Municipalities have no control over income taxes in Municipalities have no control over income taxes in

Canada, this mechanism could not be relied on to achieve Canada, this mechanism could not be relied on to achieve the land use objectives of the BHI.the land use objectives of the BHI.

Review of EGS Programs in Review of EGS Programs in AlbertaAlberta

Ernie Ewaschuk (Land Stewardship Centre)Ernie Ewaschuk (Land Stewardship Centre) Reviewed 7 programsReviewed 7 programs

CWS Basin Easement Program (1967-70)CWS Basin Easement Program (1967-70) Red Deer Habitat Retention Program (1978-80)Red Deer Habitat Retention Program (1978-80) Landowner Habitat Program (1986-91)Landowner Habitat Program (1986-91)

Minburn, Red Deer, Bow River, EID (AFWS)Minburn, Red Deer, Bow River, EID (AFWS) Incentive contracts to curb habitat lossIncentive contracts to curb habitat loss

North American Waterfowl Management Plan (1986+)North American Waterfowl Management Plan (1986+) Purchase/lease of development rights/paymentsPurchase/lease of development rights/payments

Barrhead Partners in Conservation (1989+)Barrhead Partners in Conservation (1989+) Tax rebate on habitat landsTax rebate on habitat lands

MD Rockyview Municipal Tax Incentive Program (1993-MD Rockyview Municipal Tax Incentive Program (1993-1996)1996)

Tax incentive for conservation tillageTax incentive for conservation tillage

Review of EGS Programs in Review of EGS Programs in AlbertaAlberta

Lessons LearnedLessons Learned Flexibility important (Landowner Habitat Program)Flexibility important (Landowner Habitat Program) Emphasize multiple benefits/objectives (Landowner Habitat Emphasize multiple benefits/objectives (Landowner Habitat

Program)Program) Random selection of habitat reduces performance of program Random selection of habitat reduces performance of program

(Red Deer Habitat Retention Program)(Red Deer Habitat Retention Program) Incentive payments need to be high enough to change behavior Incentive payments need to be high enough to change behavior

(Red Deer Habitat Retention Program)(Red Deer Habitat Retention Program) Education and awareness increases success (NAWMP)Education and awareness increases success (NAWMP) Tax base losses in Barrhead program minimal (Barrhead Tax base losses in Barrhead program minimal (Barrhead

program)program) Landowner support/changes in behavior (Barrhead program)Landowner support/changes in behavior (Barrhead program) Conflicts with other incentives/programs for agricultural Conflicts with other incentives/programs for agricultural

development (Basin Easement Program)development (Basin Easement Program) Unanticipated consequences of pre-emptive destruction from Unanticipated consequences of pre-emptive destruction from

payment programs (Basin Easement Program)payment programs (Basin Easement Program) Agricultural incentive payments for BMPs work (Rockyview Agricultural incentive payments for BMPs work (Rockyview

Program)Program)

Price Based ToolsPrice Based Tools Quantity Based ToolsQuantity Based ToolsDevelopmeDevelopment nt Charges/In Charges/In lieu feeslieu fees

Tax Tax CreditsCredits

TDCsTDCs Mitigation Mitigation BankingBanking

Easements Easements and PDRsand PDRs

Voluntary vs Voluntary vs InvoluntaryInvoluntary

InvoluntaryInvoluntary VoluntaryVoluntary VoluntaryVoluntary InvoluntaryInvoluntary VoluntaryVoluntary

Municipal Municipal Fiscal Fiscal ImpactImpact

PositivePositive NegativeNegative- Municipal - Municipal grants in grants in lieulieu

LowLow PositivePositive NegativeNegative

Threshold Threshold BasedBased

NoNo NoNo YesYes YesYes NoNo

FlexibilityFlexibility Differentiate Differentiate by activity by activity and impactand impact

DifferentiatDifferentiate by land e by land useuse

Multiple Multiple objectives objectives for for conservation conservation and and developmentdevelopment

Usually Usually single single objective objective (wetlands)(wetlands)

Multiple Multiple objective for objective for conservationconservation

AdministratiAdministrative ve RequiremenRequirementsts

Monitor land Monitor land useuse

Monitor Monitor land useland use

TDC TDC RegistryRegistryZoningZoningBonus/Credit Bonus/Credit calculatorcalculator

Offset Offset RegistryRegistryOffset Offset calculatorcalculator

CertificationCertification

Impact on Impact on GrowthGrowth

NegativeNegative Negative Negative (low?)(low?)

Transfer of Transfer of growth growth versus limitversus limit

NegativeNegative Negative Negative (low?)(low?)

Next Steps for TDCsNext Steps for TDCs Detailed evaluation of potential goals and Detailed evaluation of potential goals and

identification of sending/receiving area options identification of sending/receiving area options based on BHI Phase 2 plan and public inputbased on BHI Phase 2 plan and public input

Economic analysis and potential design issues Economic analysis and potential design issues related to market size, supply, and demand;related to market size, supply, and demand;

Process for seeking public input and Process for seeking public input and recommendations on design from landowners recommendations on design from landowners and developersand developers

Evaluation of legal and administrative optionsEvaluation of legal and administrative options Education and awarenessEducation and awareness

ConclusionsConclusions Many jurisdictions struggling with these issues in Many jurisdictions struggling with these issues in

AlbertaAlberta OpportunitiesOpportunities

Landuse FrameworkLanduse Framework Review of MGAReview of MGA Institute for Agriculture, Forestry and the Environment to Institute for Agriculture, Forestry and the Environment to

identify market-based solutions to increase environmentally identify market-based solutions to increase environmentally sound practices in the renewable resource sectorssound practices in the renewable resource sectors

Partners/Shared Experience and LearningPartners/Shared Experience and Learning Red Deer County/Mistakis InstituteRed Deer County/Mistakis Institute Southern Alberta Land Trust/ALTA/NGOsSouthern Alberta Land Trust/ALTA/NGOs Watershed groups/Basin councilsWatershed groups/Basin councils FoundationsFoundations

ThreatsThreats Pace of development, affordabilityPace of development, affordability

Key ReferencesKey References Dorfman, Jeffrey, et al. 2005. The feasibitliy of a Dorfman, Jeffrey, et al. 2005. The feasibitliy of a

transferable development rights program for transferable development rights program for Athens Clarke County Georgia, Alliance for Athens Clarke County Georgia, Alliance for Quality Growth, University of Georgia.Quality Growth, University of Georgia.

University of Georgia Land Use Clinic University of Georgia Land Use Clinic http://www.law.uga.edu/landuseclinic/index.hthttp://www.law.uga.edu/landuseclinic/index.htmlml

Fulton, William, Jan Mazurek, Rick Pruetz, and Fulton, William, Jan Mazurek, Rick Pruetz, and Chris Williamson. 2004. TDRs and other Chris Williamson. 2004. TDRs and other market-based land mechanisms: How they work market-based land mechanisms: How they work and their role in shaping metropolitan growth. and their role in shaping metropolitan growth. Washington, DC: The Brookings InstitutionWashington, DC: The Brookings Institution

Thank youThank you Max Bell Foundation, DUC, BHIMax Bell Foundation, DUC, BHI ContactContact

Marian WeberMarian WeberAlberta Research CouncilAlberta Research Council250 Karl Clark Road250 Karl Clark RoadEdmonton, Alberta T6N 1E4Edmonton, Alberta T6N 1E4780-450-5193780-450-5193