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Minutes 1993-08-03 ARROYO GRANDE Ch \' COUNCIL AND PLANNING COMMISSION AUGUST 3, 1993 The Arroyo Grande City Council and Planning Commission met in a special session with Mayor Gallagher, presiding. Present are Councilmen Moots and Souza; absent are Councilmen Brandy and Burke. Chairman Carr and Commissioners Deviny and Keen are present; absent are Commissioners Tappan, Soto, Reilly, and Hatchett. Staff in attendance are City Manager Chris Christiansen and Planning Director Doreen Liberto-Blanck. Also in attendance is Ray Belknap of the San Luis Obispo Land Conservancy. The meeting was called to order at 6:30 P.M., then a ten minute recess was taken because the Planning Commission did not have a quorum. The meeting reconvened at 6:40 P.M. as a workshop. ORAL COMMUNICATIONS - None Commissioner John Soto arrived at 6:42 P.M., thus giving the Planning Commission a quorum, and the public meeting could start. TRANSFER OF DEVEWPMENT CREDITS (IDC) Ray Belknap, San Luis Obispo Land Conservancy, stated he would describe a land conservancy, provide an overview of a Transfer Development Credit (TDC) program, explain the contract they have with the County related to TDC, and ask if Arroyo Grande is interested in participating as a pilot project. The Land Conservancy is a local 501.c3 non-profit, tax exempt corporation, or a land trust. There are about 1,000 in the country and over 100 in the state. The Land Conservancy's primary goal is to protect land by owning it or owning an interest in it. The Land Conservancy's standard mission is to take contributions of land or land easements. For example, a large rancher may have 6,000 acres of land and want to give it to the children, but the children can't afford to pay interest on the inheritance taxes. One way to deal with the estate problem is to put a development or conservation easement on the property, The easement will qualify for an inheritance tax break in the estate planning, and the property owner can take the value of that easement as a contribution on this year's 1040. Another mission of the Land Conservancy is to protect land by taking an active interest. We get involved with planning studies using grant funding; acquiring land by easement or gifts; maintaining land we own; and working on land restoration, such as planting trees. The Land Conservancy has been involved in Black Lake Canyon by working with the landowners to preserve the canyon. Another project the Land Conservancy is working on is restoration work trying to save a rare plant from extinction and restore oak woodlands. Another project is restoration of the San Luis Creek in Avila between the third and fourth bridges. The Land Conservancy was also involved with a project involving the planting over 500 oak trees on Highway 46. The most important project we are working on is in Cambria on a Transfer of Development Credits Program in Fern Canyon with the objective to save the canyon. The Mayor asked how a TDC program would work in our area to protect farmland. Mr. Belknap responded that any TDC program reflects the mission of the local jurisdiction. You need to designate by policy the land in receiving and sending zones. The Mayor indicated that the community is supportive of agricultural protection in the Arroyo Grande Valley, and questioned how to discuss this issue with a property owner who may have farmed for several generations and the children are not interested in farming the land. Mr. Belknap stated that a TDC works best when it is a voluntary program. The question is how can incentives be provided to get that farmer to sell his development rights. The Mayor asked whether the development rights of a piece of property can be purchased rather than purchasing the entire acreage. Arroyo Grande City Council and Planning Commission Page 2 August 3, 1993 Mr. Belknap said that credits in this respect are actually like a monetary system. How much these credits are worth depends upon how much someone is willing to pay for it. To make a pilot project viable you have to do some economics to be sure it will work. In some areas local governments have actually floated general obligation bonds and have a bank account to underwrite loans. In Montgomery County, Maryland they did this, but it was never used because the sales took off and they didn't need to use it. On one end of the spectrum, people can buy and sell. The only thing the County or the City wants to see is that when the person comes in for development credit, he submits proper documents to illustrate that they are validly obtained credits. On the other end of the spectrum you can have local governments doing all the buying and selling. In between, you have a system where you can specify that it has to be non-profit and that's how it worked in Cambria. The County ordinance stipulates that the mc's have to be purchased and sold from an approved, non-profit 50l.c3 organization. The general logic is that they would like to have any profit captured in the public sector, so it can be used for the benefit of the public. Commissioner Carr asked what occurs if there is a piece of agricultural land that doesn't have any development potential. Mr. Belknap said the term TDC is often used interchangeably with the word TDR, or Transfer of Development Rights, On the East Coast those things have actual definitions, but we use them out here to imply that credit is something you do assign; it is not an inalienable right you inherit when you purchase the property. It is assigned and you will be assigned on individual properties "x" credits. Then on the other receiving property, you say this property can absorb "x" credits. When you do enough environmental and community work, you know that that level of increase will be acceptable. The Mayor stated that the City is almost at build-out, but there are small individual in-fill lots, some industrial zoning land, and some commercial land still available. Within these constraints what can Arroyo Grande do when a potential developer comes to the City and we have this concept in place, how do we get the potential developer and the landholder of lands we want to protect together. Mr. Belknap said that once the landowner has retired the property and obtained credits, they can advertise in the newspaper. The most important thing is that the land has to be permanently protected through a recorded legal instrument. It can get complicated because the developer may buy credits if he knew he was going to get his permits, but he can't get his loan with the credits until he gets his permits. The farmer may want to retire his land if someone would buy his credits, but he doesn't want to make a commitment until he knows someone is going to buy his credits, That's one reason the land trusts often get involved, because they can appeal to landowners on a tax basis to make gifts of property or easements and thereby inherit these easements at little or no value. It's important to have some credits available early for use by the development community without getting in a Catch 22 stalemate, You want the system up and running so that there is a track record of TDC's being purchased at a certain price. Then you ask that eacb TDC sale be recorded, so that appraisers have access to that public information and can help do appraisals of what development credits are worth. You need some bankroll to try to get the first few TDC's purchased. Once you get over the first hurdle, mechanically they work quite well. The developers will know the landowners who have TDC's available and they'll get together. I believe the recording of the sale is one of the key parts. The Mayor asked how with a declining real estate market, declining business economy, and declining industrial development, does this concept become an asset to someone looking to expand. How does this become an incentive for someone to choose Arroyo Grande over San Luis Obispo or Santa Maria or some other place in California. Mr. Belknap stated the process does add to the cost of development, because you're using the new development to pay for retiring agriculture, In a situation where you don't have enough commercial land, it is going to increase the value anyway. Commissioner Soto stated he feels that credits can be used to permit taller buildings in Arroyo Grande. -----.-- . Arroyo Grande City Council ani Planning Commission Page 3 August 3, 1993 Mr. Belknap said that the Arroyo Grande Valley is not all in the City's jurisdiction and there may be a way to work with the County so the County area will accept additional development. The Mayor discussed the situation of residential adjacent to agriculture, including buffer zones. Commissioner Keen asked if we require these buffer zones around residential development, could we buy these easements and then the farmer can get tax credit and then we would have the residential areas protected. Mr. Belknap responded that there are a variety of ways to permanently protect land from development and stated he was most comfortable with a conservation easement. A private transaction between the farmer and the Land Conservancy did not require the approval of the City or County, If the landowner gives the Land Conservancy an easement before submitting a development application to a city, that easement and the value of the easement will constitute an IRS contribution. Commissioner Soto stated that the City has mandated that developers give open space easements as part of their project. Could the City have requested open space easements and made it a tax deductible contribution from the developer to the City? Mr. Belknap stated that he is not an attorney, but the California Legislature has tried various ways over the years to encourage landowners to voluntarily protect their land. The Williamson Act was the first, and then the Open Space Easement Act, which broadened the basis as to what kinds of land could be protected but the land has to go to a public agency. In the early days that often meant public access, so it didn't encourage landowners to give you an easement. The newest program adopted in 1979 is the Conservation Easement Act. An easement can be given to a City, a County or a non-profit organization, but it must be voluntary or the IRS will not recognize it. The Land Conservancy is often approached by developers to discuss giving us an easement prior to development. Often I discourage it. Although we want the land, if he gives me an easement, then I have a real interest in property that is undeveloped and therefore I have to participate in the public hearings on the development project to defend the easement and that may not work to their advantage. I'd rather be in a position to accept easements and implement stewardship programs, rather than participate in a public hearing through which that easement is extracted. Commissioner Soto asked whether there is a problem with TDC's and municipalities trying to meet their low-cost housing quotas? Mr. Belknap stated that they are separate programs, Mr. Belknap then discussed TDC pilot projects he was investigating. He stated that if the City is interested in being considered as one of the pHot projects, a correspondence would be needed. Mr. Belknap said that protecting the Arroyo Grande farmland is extremely high on his list, and would be willing to work with the City on a program. Commissioner Carr stated he would encourage the City to take the next step. CouncHman Souza said he felt it had good potential and worth investigating. Commissioner Soto said he could see a lot of problems and that there were a lot of questions, but agreed that the City should pursue it. Councilman Moots said he too was willing, but we should carefully take the next step. It was unanimously agreed that the Planning Director would send a letter to the Land Conservancy asking to be considered as one of the pilot projects. The Mayor thanked Mr. Belknap for his presentation. POTENTIAL PROJECTS FOR OFF-SITE MITIGATION FUND, PER RANCH GRANDE CONDITIONS OF APPROVAL Mr. Belknap of the San Luis Obispo County Land Conservancy stated that they would be working on the project. Planning Director Liberto-Blanck stated that the offsite mitigation land should be similar to that which was lost in the Rancho Grande project. $25,000.00 will be contributed by the developer as a one-time fee prior to recordation of any of the tract maps. Arroyo Grande City C""ncil and Planning Commission Page .4 August 3, 1993 Mayor Gallagher stated that a project could include the creek area from Mason to Highway 101, so it is enhanced for human activities, as well as riparian habitat. Mr. Belknap responded that he would first try to find a site that would match the Rancho Grande land. Councilman Moots spoke of the old PC railroad right-of-way at the edge of Arroyo Grande, running up to Tally Ho Creek, clear up to Highway 227. He pointed out that there were old 2S ft. lots scattered all the way along there. He stated there were a lot of oaks trees. Having a project in the City was agreed as being important. The wetlands area by Oak Park was mentioned as another potential project. Mr. Belknap described the process to locate a site as part of the offsite mitigation fee program. Jennifer Peterson of Five Cities Press Recorder asked whether the site would be accessible to the public. Mr. Belknap stated that looking at the natural resource was the highest concern, but that he had no preconceptions as to what the City would decide to do where the public or other issues were concerned. Mayor Gallagher directed Planning Director Liberto-Blanck to take the potential projects, after compiled by the Land Conservancy, to a public meeting with the Planning Commission for a recommendation to the City Council. All present were in agreement with this procedure. CITY COUNCIL/PLANNING COMMISSION STAFF ITEMS AND COMMENTS None WRITTEN COMMUNICATIONS None ADJOURNMENT There being no further business before the Council/Commission, on a motion by Commissioner Soto, seconded by Chairman Carr, and unanimously carried, the meeting was adjourned at 8:30 P.M., the City Council adjourned to their regular meeting on August 10, 1993, and the Planning Commission to a special meeting with the Traffic Commission on Thursday, August 12, 1993, at 7:00 P.M. ATTEST: 1\.~~~~ m -I Nancy Bro ,CommtsSlOn Clerk