Staff will investigate bond counsel’s advice about how funds from selling county-owned TDRs can be used
The goal of one recent Sarasota County Commission discussion, as noted on the agenda, was for the board to establish a standard price and other terms for the sale of county transferable development rights (TDRs), which are a key element of the county’s 2050 Plan for new housing east of Interstate 75.
The commissioners were about 15 minutes into their March 9 discussion, however, when they hit a major roadblock. It resulted in a unanimous vote to delay any decisions until a later date.
Planning Division Manager Allen Parsons, who was making the presentation, informed the board that a communication from bond counsel indicated that the proceeds from selling TDRs the county purchased with bond revenue would have to be used to buy new property within two years and that none of the funds could be used for maintenance of property in the county’s Environmentally Sensitive Lands Protection Program (ESLPP).
Most of the property the county has purchased in the ESLPP has been paid for with bond revenue, he added.
Additionally, Parsons said, it appears the proceeds from such sales could not be used to pay down the bonds.
“That is just odd,” Chair Al Maio replied, especially that the money could not be used to pay off bonds.
“That came directly from the bond counsel?” Vice Chair Paul Caragiulo asked. Was that notification in the form of a memo or in a conversation, he asked.
Parsons replied that he believed the information was communicated to county staff through the County Clerk of Court’s Office. He added that staff could seek written confirmation.
“It is almost key to our decision-making abilities on this issue,” Commissioner Christine Robinson pointed out. “Not only is it essential for TDRs,” she said, “it’s essential for the [ESLPP].”
Deputy County Attorney Alan Roddy told the board he had spoken on the phone with the bond counsel. His understanding, Roddy continued, is the concern that the county would endanger the tax-exempt status of the bonds used to purchase land through the ESLPP. The IRS might consider the funds from sales of TDRs on property bought with the bond revenue to be disposition proceeds, he added, which would have to be used within two years to buy replacement land.
“You could always ask for an IRS opinion on that,” Roddy told the commissioners.
“I’m not crazy enough to debate a whole arsenal of bond attorneys,” Maio responded. “I just find it inconceivable that when these rights are sold, we’re going to hit some sort of wall …”
On a more positive note, though, Roddy said, some portion of those bonds will be paid off in 2019, which would enable the county to sell some TDRs in 2017 without any concern.
What is a TDR?
At the outset of Parsons’ March 9 presentation, he explained exactly what a transfer of development rights is and pointed out that it is “unique to [Sarasota] 2050,” in terms of county planning.
A TDR, Parsons said, “is the right to build one housing unit. … These rights can be sold or given to others.”
The process includes sending areas and receiving areas, he continued. After sending the rights to build housing units to another piece of property — the receiving land — the sending parcel no longer has those rights to build units. Additionally, that means the receiving property ends up with the right to construct extra units, he pointed out.
“You actually build up density in [Sarasota] 2050,” he added. The goal is “to concentrate development to the least environmentally sensitive lands … [and] to incentivize protection of connected environmental features and open spaces …”
To take full advantage of the maximum allowable housing density of five housing units per acre in a 2050 development, policy makes it possible for a developer to acquire TDRs from an off-site sending zone, Parsons pointed out. However, TDRs also may come from greenspace within a 2050 site to maximize housing density in one part of the development while leaving open space in another area.
A TDR “bank” was established under 2050 policy, he added. As a result, he said, TDRs can be sold to approved 2050 developments from property the county bought after 2002. One deposit already in the bank represents 642 TDRs from land known as Deer Prairie Creek-Churchill; it contains 2.4 acres of marshes and sloughs; 82.2 acres of Mesic hammocks; 250.6 acres of pine flatwoods; 2.9 acres of swamps; and 21.1 acres of wet prairies, according to a graphic Parsons showed the board.
A recent staff analysis estimated the county has 494 TDRs from property it bought with cash instead of bond revenue, Parsons noted. Another 1,373 TDRs are estimated on parcels that were fee simple acquisitions with bond funds, he added. Among those are the 642 from the Deer Prairie Creek-Churchill site.
Commission questions
After Parsons raised the issue of TDRs from property the county purchased with bond funds, Vice Chair Caragiulo characterized the situation as “anathema to the whole idea of financing … anything.”
Commissioner Robinson pointed to the importance of the county’s being able to use the TDR sales proceeds as needed, instead of having them tied to a specific timeframe.
Caragiulo was the first of the board members to suggest continuing the discussion. “You have a component that makes a complicated process for evaluation [of TDR pricing] even more complicated,” he pointed out.
“I would agree with that,” Chair Maio replied.
“We’ve got Orange Hammock [Ranch] in the room, too, to consider in the whole thing,” Robinson pointed out, referring to the 5,774-acre property near the City of North Port, which is on the county’s ESLPP project list. The Conservation Foundation of the Gulf Coast already has begun an initiative to try to acquire the land, which is listed at $22,807,300 by an Orlando real estate firm.
Caragiulo made the motion to continue the discussion until staff has been able to complete a comprehensive analysis regarding the bond question.
Commissioner Carolyn Mason seconded the motion.
“The only thing I would say,” Robinson added, “is there are people who are waiting for this decision right now.”
“Yes,” County Administrator Tom Harmer replied.
“We don’t need to hear that our commission agenda is jam-packed and it’s an extended stay” of the discussion, Maio told Harmer.
“I would much prefer that TDRs are bought from the private market,” Commissioner Charles Hines said. However, if the sale of county TDRs will enable the county to purchase and preserve more environmentally sensitive lands, he pointed out, “I would be fine with that.”
“I also am not for interfering with the private sector,” Maio responded. Nonetheless, if the private market is experiencing difficulty in getting TDRs quantified and registered, he said, the county needs to provide an alternative to developers if it wants to proceed with the 2050 Plan.
After the unanimous vote to continue the discussion, Parsons told the board that one offer for 42 county TDRs was submitted in November 2015, but the applicant had asked staff to wait before bringing it to the board. He received an email the previous day from the applicant, Parsons added, asking for the matter to be scheduled on a commission agenda.
“We will be bringing that offer to you,” Parsons said.
“They’re welcome to do that,” Maio replied.