When Montgomery County's planning staff first started talking about setting up a program where development rights could be transferred from upcounty farm land to developing areas downcounty, everyone said it couldn't be done. Despite years of nationwide debate, very few transferable development right (TDR) programs had been set up and very few acres of land actually protected from development.

Now, a year after the program started, the skeptics in Montgomery County are still unconvinced. Although there are some indications that the cost of farm land has dropped and that the market for farm land has slowed -- results planners hoped for -- farmers upcounty and citizens downcounty say there may be other side effects to the program that could be creating new problems.

Montgomery county officials conceived the TDR program as a way to justify lowering the allowable development density in the county's 73,000-acre agricultural reserve. Although the density had been lowered to only one dwelling unit per five acres just a few years earlier, county staff said farm land was still disappearing at a rapid rate, primarily through the fragmentation of land into small mini-farms.

The Montgomery County Council then lowered the density to one dwelling unit per 25 acres, but approved a TDR program where landowners in the agricultural reserve could sell development rights at the higher density. Anyone interested in developing land in areas of the county where increased density is allowed, called receiving areas, can buy TDRs from farm land owners.

It works like this: A TDR is the right to develop one dwelling unit. If a farmer has 500 acres he could either develop it at one dwelling unit per 25 acres (which would equal 20 homes) or he could sell his development rights at one dwelling unit per five acres. The farmer would have 100 TDRs to sell.

A developer with a 100-acre tract of land in a receiving area that was zoned at a base density of two dwelling units per acre but with a TDR designation of three (meaning that with TDRs he could develop the land at three dwelling units per acre) could purchase a farmer's 100 TDRs and build 300, rather than 200, units on his site.

Although only a year old, the program has broken new ground for communities exploring the possibility of divorcing land from its development potential. The buying and selling of TDRs, slow at first, is picking up and gradually becoming more and more sophisticated as buyers and sellers devise new ways to use the program.

Melissa Banach, Montgomery County's director for the TDR program, said that there are about 435 TDRs begin processed by the county, some being bought for speculation, some for specific developments and some even appearing as collateral or down payments for housing mortgages.

"TDRs can even be used to settle family disputes," said Banach. "Many farm families have a hard time settling estates because there are often some children who want to continue farming and other who want to sell the land for development. This way the family can sell the development rights and continue farming."

If they can find a market. County farmers, however, say that's a problem. The value of a TDR, just like real property, floats free of any government interference. The County Council established the existence of more than 15,000 TDRs in the agricultural reserve before finding adequate receiving areas downcounty, an imbalance that has kept the price of a TDR so low most farmers won't consider selling.

"The TDR program backfired on the county planning commission," said George Lichlider, a Laytonsville farmer who is head of the Montgomery County Farm Bureau. "The price of farm land has gone down, but that has meant it is cheaper for a developer to buy farm land in the reserve and transfer the TDRs than buy the TDRs from a farmer. People who need to sell their TDRs, the farmers, can't sell them."

TDRs are currently going for about $5,000 apiece, though the price has fluctuated from $4,200 to $7,000 over the first year. Lechlider said he wouldn't consider selling any of the TDRs from his 300-acre livestock farm until the price rose to between $7,000 and $10,000.

But "with the additional regulations and complications, the expense of time and attorneys, TDRs actually end up costing about twice their market price," said Stephen Kaufman, an attorney with the land use law firm of Linowes & Blocher. "And because receiving areas are so scarce, developers are asked to pay a premium for it."

According to Kaufman, who has watched the program through the planning and implementation stages, the county is having trouble finding places for the TDRs.

"The county should have put the entire program in place at one time," he said. "The way it is now, every time the county tries to rezone land . . . as a receiving area the local citizens protest. Then the county has to compromise. It's going to be difficult to find a place for all the TDRs."

Banach admits problems have been caused by the imbalance between the 15,000 available TDRs from the agricultural reserve and the lack of receiving areas.

"Ultimately, we have to find a home for all wayward TDRs," said Banach. "Whenever we do a master plan update, we will consider the parcels in the area for TDR development, but it may be years before we get to every section of the county."

The county currently has density increases to accommodate about 7,000 TDRs, with another 2,000 being considered for the Gaithersburg area. But residents in Potomac have successfully fought to get TDR levels in their part of the county reduced slightly, and Kaufman said he believes it will get harder and harder for the county to convince residents in developed areas to take on higher densities for the sake of preserving farm land.

"If the county wants special services, like good parks, libraries and schools, they will have to be utilized in efficient ways," said Kaufman. "Part of the ideas behind the TDR program was to increase densities in area that had the services to accommodate more intense development. But that hasn't happened."

The areas of the county that have been designated receiving areas are not in the dense, developed sections south of the Beltway where services already exist but are out in areas just on the brink of development, a trend critics of the program cite as evidence that the developers rather than the farmers are the true beneficiaries of the program.

"What puzzles us is that two of the receiving areas [near Gaithersburg] are working farms," said Susan Fellows, a member of the Westleigh Citizen's Association, which has been active in the master plan revisions for the Gaithersburg area. "The farm land considered worth preserving, the agricultural reserve, is farm land the developers don't want yet."

On the issue of services, Fellows is also skeptical. "There aren't services for this kind of density out here near Gaithersburg. Route 28, which runs through this area, is a road already over capacity. Our fear is that once development creeps up to the edge of the agricultural reserve, this policy will be abandoned and the farm land developed."

The program, though, has also had its successes. Banach said that the price of farm land has dropped and the rate of fragmentation has slowed.

Even Kaufman, critical of the direction the program has taken in the first year, said he was "guardedly optimistic" that some of the problems will shake out in months to come.

"It appears to be beginning to work," said Kaufman. "And as the county becomes more adept at managing it, it should work better."