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TDR Funding: Revolving Fund vs. Open Market

After spending two years crafting, debating and re-crafting a solution to development pressures in Lysander, two plans were recommended - one a revolving bank fund run by the town and the other a free market system with no government involvement.

With the revolving bank fund, town officials purchase development rights from the landowner, document them and store them until an auction is held, at which point the rights are sold to the highest bidder. The open market system allows a buyer in a receiving zone to purchase development rights from a seller in a sending zone at fair market value (in essence, what both parties are willing to settle upon), but the town is still involved regarding documenting rights, approving the transfer and placing an easement on said property.

"Some of us felt the beauty of the town being involved was the town could purchase the rights [from the farmer] and bank them until the developer came around and wanted to buy the rights," said Robert Hornaday, the town engineer.

Lysander Councilor Brian May agreed. He said the bank acted as a catalyst for the program by bringing a willing seller and buyer together and providing "a mechanism for just compensation without the need to raise local taxes." On the other hand, he said he was in favor of the open market system, which "simply relies on free enterprise and the laws of supply and demand," and keeps government small and out of peoples' private business.

"The problem with the open market system is that it does fall short in the area of just compensation," May said.

After lengthy discussions, officials decided to integrate both the revolving fund and the free market system into the adopted language.

Development rights bank

To get the program started, officials will use the Agricultural & Markets $1.07 million grant awarded to the town to purchase the development rights from three Cold Spring Peninsula farms at 75 percent of the assessed value (this is what the Ag & Markets would pay under the Purchase of Development Rights program, which buys the rights and extinguishes them rather than transferring them to another property). The development rights will then be documented and placed in a bank and an easement will be placed on the land prohibiting landowners from ever developing the property. Then, when the demand for development arises, town officials will hold an auction to sell of the development rights in the bank.

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