In the first public auction of its kind, the Montgomery County Planning Board has recommended selling 30 sets of development rights at below market value to two area companies that were the only contestants in sealed bidding last week.
The development rights, known as TDRs, or transferred development rights, are a key part of the county's farmland preservation program. Farmers get one TDR for every five acres they dedicate to the county's rural agricultural zone.
Under the zone, farmers can only build one dwelling unit for every 25 acres of land they own, but can sell the TDR to a builder, who can use it to increase the density of development on property located in certain designated areas of the county.
"To a farmer, he's negotiating for his retirement. It's a very precious thing to him," said William H. Hussmann, vice president of the Hollowell Corp., which bid on nine TDRs that were offered as a block in the Olney area.
The second bidder, The Development Group, a Prince George's County partnership, offered to buy the 21 remaining TDRs. A spokesman said the company wants the rights to boost density on property it is developing for Ryan Homes on Route 198 in Montgomery.
The county obtained the 30 TDRs through the acquisition of parkland, said William Greis, a county land-acquisition officer.
It decided to put the rights up for auction in two blocks because the Olney TDRs can only be used in the Olney area, he said. The other TDRs can be applied in any other designated area in the county.
Hollowell, which is owned by Leonard Kapiloff, a longtime county developer, offered $4,715 for each of the nine TDRs. The price is below market value, which normally ranges from $5,500 to $6,000 for TDRs in Olney, Greis said.
The Development Group, headed by developers Thomas Munz and Kenn Roberts, bid $3,501 for each of the other TDRs. Market value for development rights outside Olney ranges between $4,000 and $4,500, Greis said.
"We didn't think it was any big steal," Roberts said. "It was a good deal for us because we can use them right now. We would never pay that price for TDRs if we were going to use them a year from now."
The planning board decided to accept the offers because the $155,956 sale was in cash. "If we were selling on a term basis, by essentially letting the buyer acquire over a number of years, we could have gotten more," Greis said. It forwarded the decision to County Executive Charles Gilchrist, who can accept or reject the bids.
Kapiloff is seeking 550 TDRs in Olney. The development rights will allow the construction of 300 houses in addition to the 550 units allowed without TDRs under current zoning on the 300-acre site, Hussmann said.
So far, the developer has purchased about 300 TDRs. Hussmann called the bid price "average."
Roberts said he was surprised initially to find that his company was the only bidder. "The real incentive to bid is if you had a project ready to go. But so many developers are hung up by the Adequate Public Facilities Ordinance we're not really surprised now," he said.
The Development Group is planning to build 670 town houses and single-family homes in a 110-acre subdivision known as Saddle Creek. The company is in the process of buying 250 TDRs, which will boost density on the site by about one-third, Roberts said.