Economist: Now Is Good Time to Refine Virginia's Tools for Open Space Protection

October 5, 2010 — The current construction downturn, devastating for Virginia building trades, may have one potential upside: It offers a chance for policymakers to re-think and sharpen the preservation tools used to guide future development and protect the state's increasingly threatened natural landscape, economist Terance J. Rephann writes in the current issue of the Virginia News Letter, published by the University of Virginia's Weldon Cooper Center for Public Service.

Urban growth resulted in a loss of approximately 200,000 rural acres to development from 2002 to 2007, writes Rephann, an expert on regional economies. Along with the loss of these rural areas are the scenic vistas, natural resources and the ecological and economic benefits they produce.

The state's policy kit now contains a variety of regulatory and incentive-based tools that have been used with various degrees of success, he writes. With rural open space losses mounting and land protection program costs increasing, interest has grown in alternative approaches, such as transfer of development rights, a tool has been used at times in some other states that allows landowners to trade their development rights to others.

In the Virginia News Letter, Rephann finds pluses and possible difficulties with transfers of development rights, and also reviews other land protection methods that have been used in Virginia.

"It doesn't take a degree in urban planning to recognize that sprawl, a pattern of unplanned, low-density and often noncontiguous development, is becoming an increasingly more visible and controversial part of Virginia's landscape," he writes. "A drive along any of the congested corridors emanating from Washington, D.C., Hampton Roads and the Richmond metropolitan area provides ample evidence that the traditional urban, suburban and rural land use continuum has given way to a more complicated spatial arrangement. Even the term 'ex-urban' conjured up to describe the phenomenon of 'sprawl beyond sprawl' fails to convey the extent of recent residential decentralization patterns."

Virginia's agricultural land shrunk by 882,000 acres and forest land by 413,000 acres from 1982 to 2007, according to Rephann. The loss of farming and forestry in turn has implications for industries such as sawmills and poultry processing and for supplier industries such as agricultural services and trade.

A second concern he cites is that forests, farms and natural landscapes provide valuable ecological benefits, such as improved water quality, air quality, storm water control, wildlife habitat and biodiversity. Properly managed open spaces also help the state attain aggressive milestones needed to revitalize the environmentally compromised Chesapeake Bay.

Virginia's natural landscape also provides valued scenic and recreational amenities, envelops important historic landmarks such as Civil War battlefields and contributes to residents' quality of life. These amenities, in turn, support higher property values.

In contrast, sprawl aggravates traffic congestion, encourages residential segregation and fragmentation and worsens urban economic conditions. In rural communities, it increases the costs of extending infrastructure and services into the former countryside.

Virginia's current open space toolbox contains a mixture of both effective and ineffective policy tools, Rephann writes. Some have the downside of being expensive or controversial. Before examining transfer of development rights as a protection method, he offers an overview of some of the main programs that policymakers have an opportunity to rethink, revise or use in innovative combinations with transfer of development rights. Among them:

•    Zoning. Often an effective open space protection tool, and it can be accomplished with only administrative expense. However, it is highly controversial because it restricts private property rights and does not afford permanent protection because zoning can be changed in the future. But it is a key tool that can be used well in combination with others.
•    Use Value Assessment. Offers substantial property tax relief to eligible rural landowners whose land and farm/forestry related improvements are assessed at values ostensibly reflecting their agriculture and forestry uses rather than residential/commercial development values. But many economists and planners do not view it as an effective tool for protecting open space.
•    Purchase of Development Rights. For long-term protection an obvious alternative is for government agencies to finance purchases of open space. But it has political and financial drawbacks. Except in rare situations where it can be argued that a new public good is needed (for example, land for a park), it is unlikely to be widely attractive in Virginia. It raises questions about the proper size and role of government. Moreover, land purchases can be expensive and require perpetual maintenance and assumption of liability.
•    Land Preservation Tax Credits. The program has resulted in approximately 457,000 acres being placed under conservation easement through the end of 2009 at a public cost of $1 billion in tax credits. It is similar to purchase of development rights in requiring applicants to place permanent conservation easements on their property. However, instead of selling development rights at market value, the landowner donates them to a qualified land trust or government agency in return for state income tax credits.
•    Permanent Protection Through Private Easements and Gifts. As of 2009 more than 3.69 million acres of open space, parks, historic lands, natural areas, forests, farms and other lands have been permanently protected by federal, state and local governments, and private conservation organizations. This accounts for about 14.6 percent of Virginia's total land and is more sizeable than its developed area. The lion's share is federal, state and local park and forestland. Slightly less than two-thirds (65 percent) of the preserved lands are held by the federal government, 26 percent by the state, about 4 percent by local governments, and 5 percent by private/nonprofit organizations. More than 700,000 acres have been protected in the nine-year period from fiscal years 2001 to 2009, an average of 78,700 each year over the period. Almost 92 percent of growth in protected open space from fiscal years 2005 to 2009 can be attributed to private conservation easements.

Transfer of development rights is an infrequently tried program but "at first glance it appears to be a promising and painless tool for localities to use in addressing or fortifying their open space needs," Rephann writes. It provides permanent protection. Public outlays are much lower than for simple fee purchase and purchase of development rights.

In such a program, development rights are severed from a land parcel and traded in a private market for use on another parcel of land. It is common for communities to designate an area to be protected (a "sending area") and an area where additional growth is desired (a "receiving area"). Transfers of development rights occur between these two areas. Individual programs vary widely in design and mechanics across localities, but the ultimate goal is to stimulate enough transactions to achieve land preservation objectives in the sending area.

There are many logistical, administrative and political challenges, Rephann says. He concludes that a transfer of development rights program is unlikely to be effective without invoking stricter land use regulations such as down-zoning some areas to encourage landowners to participate. But it is a tool worth serious consideration and may possibly complement other tools offered by localities, he concludes.

— By Robert Brickhouse

About The Virginia News Letter

Launched in 1924, The Virginia News Letter is a publication devoted to Virginia public policy issues. Its authors are drawn from the University of Virginia, other public and private higher education institutions in Virginia and non-academic experts in the state. Each issue features an article by a different author.

The Virginia News Letter is issued six to eight times per year. John L. Knapp, senior economist in the Center for Economic and Policy Studies, is the current editor, and Robert Brickhouse is a consulting editor.