Naples and transferring development.

The Naples subdivision on the Gaviota Coast has taken a torturous path since its informal subdivision in 1888. Today the property stands on the brink of the development of anywhere from 54 to over 100 homes, depending upon the project’s configuration.

Naples lies within the officially recognized rural area of the Gaviota Coast,
violating the intent of the County’s Urban Limit Line 

The Naples property is 485 acres of grazing and orchard land that Vintage Communities of Orange County, a builder of “luxury home communities”, proposes to convert to an up-scale “private residential enclave”.

This image of a portion of the inland section of the Naples property is an approximate representation of the effect that this project will have on the rural, agricultural environment of the property and the larger Gaviota Coast. Whatever happens at Naples will likely foreshadow what happens elsewhere on the Gaviota Coast.

The County is reviewing the developer’s proposals, and a revised EIR is due out shortly.  Legal and political forces have generated tremendous pressure on the County to approve some form of development at Naples, and the only practical way to preserve Naples as part of the Gaviota Coast’s open space will be to generate funds to compensate the landowner, developer Matt Osgood of Vintage Communities. 

The County Local Coastal Plan requires that before Naples can be rezoned, the County must determine if a “transferred development rights” program, or “TDR,” could effectively transfer the development embedded in the antiquated lots at Naples onto urban lands more suited for this intensity of development.  The California Coastal Act discourages conversion of agricultural lands and residential sprawl into rural areas.  Ultimately, the California Coastal Commission will review the County’s action concerning Naples, including the TDR program.

The Naples Coalition believes that the TDR program must play a central role in preserving the rural character of Naples.  Although other sources of funding will also likely be required, the County’s TDR program needs to be as robust and effective as possible to generate the millions of dollars needed to preserve Naples.  A draft TDR program has been developed by consultants for the County, but this TDR program has several fundamental flaws that render the program only partially effective, and so we need to ask the County to strengthen the Naples TDR program.

A TDR program at Naples would remove development from the “sending site” -- Naples, and transfers it to “receiving sites” -- appropriate urban areas in the County. TDR programs allow increased development opportunity in the receiving sites, and thus greater financial returns. A portion of the enhanced return realized by the receiving site will be paid to the developer at Naples as compensation for extinguishing development rights on the sending site.

There is no “one size fits all” TDR program, since local objectives, opportunities and needs are highly variable.  Given the magnitude of potential development at Naples, the high land values in Santa Barbara, and the uncertainties associated with any development proposal, the TDR program must generate sufficient funds to satisfy the developer’s reasonable needs, but not constitute a ‘give-away’ or involve inflated prices that will cause the TDR program to lose support in the community and appear unattractive for other funding sources.  It must be effective at actually saving a meaningful amount of the Gaviota Coast, so residents in receiving site areas will perceive clear benefits from participating in the program.

It is essential to understand and address the legitimate concerns of neighborhoods near receiving sites, sometimes referred to as NIMBYs, but we prefer to assign a new definition to the term  NIMBY: Naples Is My Back Yard.  As a community, we will all benefit from saving Naples for posterity, but we must recognize that this does involve increased development in other areas where urban services and facilities are currently available, avoiding sprawl.

Key TDR Issues:

1.                  Must the developer participate?  The County’s draft TDR program is entirely voluntary, so the developer can withdraw at any stage in the process, or demand values far beyond what is reasonable.  The Naples Coalition believes that the controlling ordinance, Local Coastal Plan (LCP) Policy 2-13, establishes that developer participation in the TDR program is a pre-condition to rezoning the Naples property.  As a condition of applying for a rezone, the developer must first participate in the TDR process, and if TDR generates funds to buy down a part or all of the development, the developer must participate in the TDR program.

2.                  How are the TDR’s buy-out values established?  The County’s draft program relies entirely on a market-based negotiation between the TDR managers and the developer, based on the estimated lot values after the rezone.  Rather than rely on hypothetical values, the California Coastal Commission has stated, and the Naples Coalition agrees, that the developer’s financial returns should use the “internal rate of return” benchmark that courts use in valuing land on which development is denied.  By utilizing this formula, the developer will receive a reasonable rate of return on his investment (calculating all of the developer’s costs and multiplying by an annual percentage return as profit).  If the public has confidence it is paying a fair price to preserve the Naples lands in perpetuity for public benefit, the TDR program will be far more effective.

3.                  Timing – how soon will the TDR program pay off the developer?  The County’s TDR program relies on the developer’s offer of an 18 month “standstill” period to allow the TDR program to generate funds, which the developer may choose to extend by another 18 months.  The Naples Coalition believes, based on other communities’ experience with TDR programs, that a longer period is required.  The Naples Coalition developed a protocol where lots are assigned a priority for preservation (bluff lots first, then lots between the highway and the ocean, then the interior lots), a fair value is assigned to each lot, then TDR funds are paid to the developer as soon as funds are generated, but the “hold” period for those lots that could be saved by projected TDR revenues will last for eight years.  This provides some funds to the developer sooner, will ensures priority lots are saved first, but gives the TDR program a longer period to function and generate more funds.

After the TDR program has bought down as much of the proposed development as possible, it is likely that additional funds will be required, such as may be raised from legislative appropriations, fundraising campaigns, and an open space district.  The Naples area, as a subset of the irreplaceable Gaviota Coast, is a leading preservation priority for the entire County.  The campaign to save Naples follows in the footsteps of community wide campaigns to save the Carpinteria Bluffs, Douglas Family Preserve, Ellwood Mesa, and Arroyo Hondo.