King County, Washington, population 2,252,782 (2019), surrounds Seattle and its suburbs. It has earned a reputation for leadership in conservation, preserving over half of its total land area by combining federal and state holdings with many county initiatives including a TDR program that leads the nation in the amount of permanently protected land (Pruetz 2012).
King County’s first TDR program was adopted in 1988 and produced only one transfer. King County launched a second-generation TDR program in 1998 that used a three-year pilot project to test the effectiveness of interjurisdictional transfers from county sending sites to receiving sites within the county’s incorporated cities. To motivate cooperation, King County offered to fund amenities within participating cities. The county budgeted $1.5 million in 1999 to acquire TDRs for a TDR Bank and another $0.5 million for amenities in cities willing to adopt inter-jurisdictional receiving areas. In 1999, the City of Issaquah and King County entered into an interlocal agreement resulting in the first interjurisdictional TDR transfer in the Pacific Northwest. In this transaction, a developer bought 62 TDRs from a county sending site which were used to add 500,000 square feet of floor area to a Microsoft office complex in the city.
In 2000, King County and the City of Seattle signed an interlocal agreement in which TDRs from agricultural sending areas in the county could be used to gain a 30 percent height bonus for residential buildings in the Denny Triangle Urban Village, a downtown district in need of revitalization. Per the agreement, King County pledged to spend up to $500,000 on Denny Triangle amenities including green streets, pedestrian/bicycle improvements, transit facilities/incentives, open space, storm water management, or public art/street furniture.
In a 2009 agreement with the City of Bellevue, King County agreed to fund $750,000 in stream improvements as part of an interjurisdictional TDR mechanism.
In 2013, Seattle and King County signed an interlocal agreement that marked the first use of a Washington law allowing tax increment financing to fund infrastructure only in cities that adopt TDR receiving areas capable of accommodating that city’s fair share of TDRs from sending areas in other jurisdictions of the Puget Sound Region. This is the only way that cities in the State of Washington can use tax increment financing. Per this agreement, Seattle creates a receiving area for 800 TDRs from sending sites under county jurisdiction and King County pledges to dedicate up to $15.7 million of additional property tax revenue to pay for open space and transportation improvements in Seattle’s South Lake Union and Downtown districts. This agreement details how and when the King County payments will be used. For example, $2.9 million is dedicated to green street improvements in the first ten years of the agreement followed by $7.8 million for parks and a community center in years 11 through 20, and $5 million for transportation improvements in years 21 through 25.
The interlocal agreements illustrate how carefully King County and its cities calibrate the amount of development allowed per TDR in response to the real estate market of each receiving area. For example, under the first interlocal agreement with Seattle, each King County TDR produced an additional 2,000 square feet of floor area, a ratio that motivated the developers of the Aspira and Olive 8 towers in Denny Triangle to buy King County TDRs. Varying that formula based on local conditions, each King County TDR yields 1,333 square feet of additional floor area under the 2009 interlocal agreement with Bellevue. Each King County TDR generates 12 different variations of bonus square feet for the first 200 TDRs transferred under the 2013 agreement with Seattle. Normandy Park’s 2012 ordinance allows 4,300 square feet of bonus floor area per King County TDR and Issaquah’s 2013 ordinance yields 1,200 square feet of additional floor area per King County TDR.
To qualify as a sending site, properties must be within the R-1 Urban Separator, RA-2.5, RA-5, RA-10, A (agricultural) or F (forest) zone. In addition, to qualify, a sending site must provide at least one of five community benefits: agricultural potential, forestry potential, critical wildlife habitat, open space, or regional trail connectors/urban separators.
Generally, the allocation of TDRs is based on the number of dwelling units that can be built on site according to the size of the property (minus submerged land) and its zoning. For example, the owner of a 20-acre property zoned RA-5 can build/retain one house on site, record an easement permanently restricting the site to one unit per 20 acres, and sell three TDRs. However, bonus TDR allocations can be gained in certain sending areas such as rural forest focus areas, agricultural lands, and legal non-conforming lots.
Sending areas in the five zones classified as Rural have allocations ranging from one TDR per 2.5 acres in the RA-2.5 zone to one TDR per 80 acres in the F zone. Land in the Urban classification of R-1 can also qualify as a sending site and is allocated four TDRs per acre.
As discussed above, interlocal agreements have created interjurisdiction receiving areas in the cities of Seattle, Issaquah, Bellevue, Normandy Park, and Sammamish. In addition, land under King County jurisdiction can qualify to be receiving areas. In urban areas under King County jurisdiction, receiving sites can occur on land zoned R-4 through R-48, NB, CB, RB or O. TDRs from sending sites in a Rural Forest Focus Area can be transferred to rural areas zoned RA-2.5 if four conditions are met: the site has domestic Group A public water service; the site is within ¼ mile of an area where lots are mostly smaller than five acres; the receiving project will not adversely affect significant resources or environmentally sensitive areas; and the project will not involve the extension of public services and facilities in a way that creates or encourages a trend toward smaller lots. Receiving areas cannot be formed on Vashon Island or Maury Island, within the Rural Forest Focus Area, or within the Noise Remedy Area surrounding Sea-Tac Airport.
Receiving sites under county jurisdiction occur in 12 zones. At the low end of the density range, the RA-2.5 zone has a baseline of 0.2 units per acre and a maximum density of 0.4 units per acre. At the high end of the density range, the Regional Business and Office zones have a baseline of 36 units per acre and a maximum density of 48 units per acre.
In addition to additional development potential, TDR can be used to satisfy traffic concurrency regulations that apply in King County’s rural areas, meaning outside the Urban Growth Area. Development cannot occur in some rural travelsheds because of inadequate transportation infrastructure. TDRs can be used to satisfy concurrency requirements if the sending and receiving sites are in the same travelshed because each TDR represents a permanent reduction of development potential and therefore need for transportation improvements. The same TDR cannot be used for both traffic concurrency and increased development potential.
A Rural TDR can also be used to increase Accessory Dwelling Units from a baseline of 1,000 square feet of floor area to 1,500 square feet.
King County commissioned a study that estimated that a reduction of 272 metric tons of GHG emissions over 30 years could result from a single TDR transaction that transfers the potential to build one dwelling unit from a rural sending site to a receiving site in downtown Seattle. On that basis, this study calculated a reduction of 19,000 metric tons of GHG emissions may have resulted from the 2001 interlocal TDR agreement that severed 70 TDRs from rural King County sending sites (preserving portions of the watershed that is Seattle’s main source of water) and transferred these TDRs into downtown Seattle’s Denny Triangle (Williams-Derry & Cortes 2011).
Between 2000 and 2014, over 50 developers purchased 518 TDRs directly from private owners, for an average of five private transactions per year and 34 TDRs bought and sold annually. These private transactions exchanged a total of $7.13 million. With 1,105 TDRs allocated to private sending site owners and almost 300 TDRs redeemed, some participants are holding TDRs, indicating speculation in the TDR market. Between 2000 and 2020, the average sale price was $22,371 for a Rural TDR and $8,888 for an Urban TDR. (Urban TDRs are only used in unincorporated areas of King County.) The highest prices for TDRs occurred in 2000 ($45,000 each) and dropped below $10,000 each in 2014. TDR activity increased between 1999 and 2007, then dropped to zero in 2008 and slowly increased as the county recovered from the Great Recession.
King County leads the nation in the acreage preserved by TDR partly because of its TDR Bank. The TDR Bank is tasked with three roles. 1) Facilitating private transactions by buying TDRs when sending site owners want to sell and holding them until receiving site developers want to buy them. 2) Acting as a revolving fund by reinvesting the proceeds of its TDR sales in continuing land protection. 3) Acquiring sending sites of special significance to incorporated cities as a means of motivating these cities to enter into interlocal TDR agreements with King County.
In addition to these three primary tasks, the Bank sells options to buy TDRs, allowing developers to secure a specific number of TDRs at a known price for the period of time needed until receiving site project approval. The Bank also offers to create extended purchase and sale agreements allowing developers to reduce risk and up-front costs. The Bank incentivizes cities to enter into interlocal TDR agreements with King County because the Bank can negotiate revenue sharing provisions that dedicate a portion of the proceeds from TDR Bank sales to the funding of infrastructure, parks, streetscapes and other amenities within the participating city’s receiving area.
King County’s TDR Bank sometime buys TDRs using its Conservation Future Tax. This tax is made possible by a State of Washington law allowing counties to dedicate a portion of property tax exclusively to preservation projects. The King County Conservation Futures Tax generally generates about $10 million annually for conservation projects. By using Conservation Futures Tax revenue to buy TDRs, King County converts what would otherwise be a one-time acquisition into an ongoing revolving fund for preservation. In its most dramatic example, King County used $22 million of Conservation Futures Tax proceeds to purchase 990 TDRs representing the preservation of a 90,000-acre forest 25 miles east of Seattle.
The bank sells TDRs for a price considered affordable to receiving site developers. This price is lower than the cost of buying some of these TDRs. For example, King County bought TDRs from one high priority sending site for $171,333 each, while the average price paid by developers was $25,000. King County is able to do this because it has acquired some TDRs at prices below that average, such as TDRs purchased in the early years of the program. It may also be likely that King County is not fixated on recouping the cost of each TDR since the program’s primary goal is preservation. Plus, any income from the sale of TDRs is more money than the county would receive if it only used the traditional approach of using money one time to buy land without selling the development rights or buying typical conservation easements as in a purchase of development rights program.
According to the King County website, the TDR program had protected over 144,500 acres between 1998 and 2019. King County included TDR in its Strategic Climate Action Plan (SCAP) as one of many implementation tools aimed at achieving its goal of reducing GHG emissions 50 percent by 2030 and 80 percent by 2050 compared with a 2007 baseline. The 2015 SCAP cites the county’s TDR program for its multiple benefits of conserving forests, preserving farmland, and curbing urban sprawl, actions that mitigate GHG emissions and sequester carbon. In its report card on the 2015 SCAP, one of the top ten accomplishments was the Land Conservation Initiative, King County’s accelerated protection of the best and last remaining open spaces, farmlands, forests, parks, and trails. TDR is recognized in the highlights of this Land Conservation Initiative. For example, interjurisdictional transfers between King County and the City of Sammamish preserved some of the envisioned greenbelt while protecting habitat for salmon and other critical species.
Pruetz, Rick. 2012. Lasting Value: Open Space Planning and Preservation Successes. Chicago: Planners Press, American Planning Association.
Williams-Derry, Clarke & Erik Cortes. 2011. Transfer of Development Rights: A Tool for Reducing Climate-Warming Emissions – Estimates for King County, Washington. Seattle: Sightline Institute.