Supervisor Speak
Transfer of Development Rights (TDR's) Monopoly & Double-Dip Zoning
By Carol M. Butterworth
Dec 4, 2002, 10:49pm

I am very concerned Warrington Township created a monopoly of the TDR's with C&M Builders Inc., with the open space purchase of the Klein Tract (equestrian club 40-acres on Street Rd) after a 1997 curative amendment. The township increased the TDR's available on that tract from 56 to 115 TDR's, 100 TDR's for C&M and 15 TDR's for Warrington Township. However Warrington Township's TDR's were restricted, not being able to be sold for 7 years. C&M Builders Inc. control all the TDR's for sale in Warrington Township. C&M sets the price for their TDR's. See further below Philadelphia Inquirer article dated September 18, 2000, which sums up what kind of money we are talking about.

On May 12,1998 Warrington Township purchased a $7.8 million bond for the open space program. C&M Builders Inc, and Warrington"s TDR's came from this bond money. The Klein's agreement of sale was purchased in lieu of condemnation and deal made with a significant share of this money. The restriction placed on the TDR's by C&M Builders Inc. does not allow the township to sell their TDR's to pay down the bond for seven years. It puts C&M in the drivers seat. The township's ability to compete with TDR's is stopped, thus creating a monopoly for 7 years. This shouldn't be. Unfair Trade Practices has occurred and a monopoly has been created by the township's agreement and consent.

Definition of monopoly: "It is the abuse of free commerce by which one or more individuals have procured the advantage of selling alone all of a particular kind of merchandise, to the detriment of the public."

I want to address Double-Dip Zoning. Our TDR Program is being abused. C&M Builders through the 1997 curative amendment received TDR's which could be used in almost every zoning district in the township. These TDR's were guaranteed to be applicable to zoning districts defined in 1997. The Board of Supervisors then approved zoning change (for example Red Stone & Blue Stone properties) to a higher use, which then further allows a more favorable use of TDR's for density on New zoning. This is total abuse of the program. The TDR Program was not set to be that way.

At the April 23,2002 supervisor meeting I requested a "Freeze" on TDR's and their uses until the program is investigated thoroughly. I want the township's restriction to be lifted from their TDR's. I cannot bring myself to vote on any zoning changes for which TDR's are being used no matter who is using them. Chairman Anderson asked me to put together a proposal. This is were I need your help. I want to form a TDR committee. Resident input is needed. I asked to see the guidelines for administering the TDR Program. To the best of my knowledge there aren't any.

Please help me by joining this committee. Either E-Mail me or call me at my office (215) 343-8247 from 10am to 8pm for details.
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PHILADELPHIA INQUIRER ARTICLE DATED SEPTEMBER 18,2000
Land Deal Led To Firm Making A Hugh Profit by Evan Halper

When Warrington Township averted a high-density housing development by purchasing a 40-acre tract on Street Road for a horse farm, local officials heralded the deal as a victory for open-space preservation. To get the land, the township paid $3.3million in cash to C&M Builders of Warrington. The township also gave C&M another form of currency: 100 so-called development credits entitling C&M to build projects in a nearby commercial zone bigger than would otherwise be allowed. At the time, township officials valued the credits at about $5,000 each, said Gerald Anderson, the chairman of the township's Board of Supervisors, making the entire transaction worth $3.8 million. Two years later, it turns out that estimate was significantly below what the credits came to be worth. Within six months of the deal, C&M sold 25 of the credits to another developer for $20,000 each - or $500,000 in all. And four months ago, C&M sold an additional two credits to Home Depot for $150,000 each, or $300,000 in all. That latest sales price was 30 times what the supervisors thought the credits were worth at the time of the horse-farm deal. "Am I shocked by what C&M is getting for them now? Yes, I wish I owned some of them," Anderson said. But he said that, overall, he is "proud" of the deal because it stopped a major housing project as the township faced rapid development and created open-space-even if it resulted in a windfall for C&M. The price the credits command now, he said, is no longer the township's concern. "The bottom line is people don't like it just because somebody is making a lot of money,: he said. The credits, known as TDR's, for transferable development rights, offer communities a potentially cash-free way to shift development off land they want to preserve. The property owner agrees to forfeit the right to develop the land in exchange for cedits issued by the local government that allow for projects that exceed zoning regulations in other areas targeted for growth. That built-in variance creates value in the credits, which, in turn, can be sold to other developers. Only 18 communities in the state have made use of the credits since the legislature authorized them in 1998. But with sprawl now a major issue in many suburban communities, the Ridge administration has begun urging local governments to use the credits to preserve open space. At the same time, it has warned that they carry risk and require "a complete understanding of the real-estate and development market." Critics of the Warrington transaction-including the former head of the township's open-space task force and a neighboring supervisor-say that understanding was missing when the supervisors agreed to buy the horse farm. They complain that the supervisors significantly underestimated the value of the credits in the fast-growing community and failed to win a good deal for taxpayers. They note that the township paid C&M $3.3 million for the land but still allowed the company to keep the development rights and sell them for use elsewhere. "This was the dumbest deal of the millennium," said Ray Stepnoski, a supervisor in nearby Buckingham Township, which has been cited by planners nationally as a leader in the use of the credits. "It's tantamount to settling a case in rubles and not knowing how much a ruble is worth." Craig Smith, a lawyer who represented Buckingham in development-credit deals there, said the credits were selling in Buckingham for $10,000 each at the time of the horse-farm transaction-twice what Warrington valued its credits at. He noted that Buckingham's credits were restricted to residential use, and referring to Warrington, added: "Everybody knows commercial is always worth a lot more." The credits have become so valuable in Warrington for several reasons: Developers need them to build certain projects along the fast-growing Route 611 commercial corridor, where zoning now bars some of the larger so-called "big-box" stores that retailers want to build. That's why Home Depot was willing to pay C&M $300,000 in June for two credits. There is a limited supply of the credits available. And that limited supply is controlled by C&M, which holds 264 of the 279 credits that have been issued by the township's supervisors-95 percent of the total. (The township holds the other 15 percent.) That near-monopoly, worth $39.6 million, based on the most recent sales price, gives the builder much to say about what gets built where, and by whom. C&M acquired the credits from the sale of those 40 acres, and by agreeing to settle nine lawsuits challenging the township's zoning regulations. "It could be considered unfortunate that a multimillion-dollar development would hinge upon the purchase of TDR's from a single source," said John Gallagher, the Norristown lawyer who represented Home Depot in its negotiations with C&M. C&M executives did not return several calls. But John VanLuvanee, an attorney for the company, said C&M had acquired so many credits because no other landowner had given up their building rights to obtain them. He said other landowners had that option, as well. If they exercised it, there would be more competion in the marketplace, and that presumably would lower the price the credits would fetch. "C&M did not invent this issue," he said. "TDR's were in the local ordinance for years." The difference between the supervisor's valuation of the credits and what they actually have sold for became clear from an Inquirer review of deed records. Anderson, the supervisor chairman, said the credits were offered to drive down C&M asking price by $1 million. But whether the land was actually worth what C&M sought is unclear; an appraisal Anderson recalls being done is not contained in the township files. However much the property was worth, it clearly was worth more than it had been 15 months before the June 1998 deal, when the land was zoned for a maximum of 12 houses. That changed, however, in March 1997, when the township agreed to C&M's request to allow 89 homes on the land. The effect was to vastly inflate the value of C&M's 40 acres. Then, a year later, the township approached the builder about setting it aside as open space. James Molenari, the former chairman of Warrington's open-space task force, calls the deal"outrageous" and complains that the supervisors "gave away the store." He questions why the township did not at least move to buy the 40 acres before boosting its value by rezoning it. Anderson said the supervisors became interested in preserving the 40 acres for use as a horse farm for the disabled only after the county offered to create a park on a neighboring tract if the township would preserve an adjacent parcel as open space. In seeking to preserve the 40 acres, Warrington's supervisors were venturing into uncharted territory. The few such deals that have been struck in Pennsylvania have been almost exclusively between private landowners involving residential properties. Typically, a homebuilder buys building rights from a property owner in an agricultural neighborhood to use for increased housing density in a district designated for development. By contrast, the Warrington horse-farm deal represents a rare example of how the credits can be used for commercial development. And it is that fact that Anderson points to in explaining how the township's valuation of the credits was so low. "No one in Bucks had ever done this before," he said. "No one in their wildest imagination would believe TDR's would sell for what they do today."

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