Credit Systems

Setting TDC Credit “Transfer Ratio”

Transferable development credits need to be assigned to the sending and receiving area parcels in a fair and equitable way, but also in a way that logically promotes the start up and continuation of the TDC program.

At the outset, TDC program designers need to determine how many credits a given parcel of conservation area land will receive, and how many credits a development area developer needs to acquire to increase the development potential on their parcel. This relationship is known as the transfer ratio. The simplest method (though rarely used) is a one-to-one ratio where each parcel is assigned a single credit, and each additional building unit in the receiving area requires a single credit. Most program designers choose more complex systems. In these cases, multiple credits may be assigned to sending area acres, and likewise multiple credits required for each additional unit on a receiving area parcel.

The number of available credits need not match the number of opportunities to use those credits. Some programs advocate an oversupply of credits recognizing not all conservation area landowners will make credits available (2:1 supply ratios are often advocated). In other cases, TDC programs intentionally create this mis-match in order to catalyze transaction activity; when there are a greater number of available credits than there are opportunities to use those credits, conservation area landowners are motivated to enter the market, knowing they may be left with unusable credits.

In the initial stages, it is likely best to take a simple approach that can be adjusted as needs of the program evolve. Regardless, the TDC bylaw will need to indicate what this transfer ratio is, or how it will be calculated.