The development process in Virginia will change drastically next month when a new law goes into effect. As of July 1, state entities will face new limits on the sorts of financing help or promises of infrastructure or land that they have often sought from developers requesting zoning changes.

Senate Bill 549, which calls for a major overhaul of the commonwealth’s proffer system, forbids localities from placing “unreasonable” proffers on new developments and restricts what's known as conditional zoning. A proffer is a commitment from a landowner or developer to assist localities in financing capital facilities and infrastructure needed to serve new development, such as schools, parks, libraries and other facilities. Proffers can take the form of cash, land or in-kind services, according to this article in the Loudoun Times-Mirror.

Here, BUILDER talks about the new law with attorney Michael Banzhaf, a partner in Reed Smith LLP's Tysons, Va., office whose Virginia clients include Toll Brothers, Kettler, and Clark Realty Capital.

Michael Banzhaf
Michael Banzhaf

Tell us about the new law.
Virginia builders and developers, like their counterparts throughout the United States, are familiar with how proffers are used in the land use entitlement process – namely, local governments responding to developers’ rezoning applications with comments requesting “voluntary” proffers of funds or property. When these proffers are not “substantially attributable” to the proposed new development, they may – or may not – constitute “takings” under the U.S. Constitution, requiring the government to compensate developers.

Previously, local governmental entities in Virginia have never been required to demonstrate the relationship between their demands and the proposed project. Unsurprisingly, many proffers simply reflect the government entity’s wishes for enhancements to infrastructure and not the actual impact the proposed development will have.

Who will bear the brunt of the new regulations?
The new law (codified in Code of Virginia Section 15.2-2303.4) represents a significant change. It places the burden on Virginia governments to demonstrate that a requested proffer is specifically attributable to the proposed new residential development. Local governments must now show, first, that a proffer addresses a need for improvements to public facilities based on the facilities’ capacity at the time of the proposed rezoning, and, second, that the new residential development in question receives a direct and material benefit from the conditions imposed by the proffer.

The upshot is that this limits the exactions local Virginia governments can request and places the onus on them to undertake the detailed studies necessary to quantify the impact of a new project on the government’s infrastructure.

Will this create conflict between governments and developers?
It’s no wonder, then, that many local governments within Virginia strongly opposed the new proffer legislation. But the new system need not be a source of new conflict between local governments and developers. One promising way forward is to look to the experience of other jurisdictions in analyzing environmental impacts of projects under state versions of the National Environmental Policy Act (“NEPA”).

The environmental impact statements required by such laws serve as a model for analogous sorts of impact statements under the new Virginia law. The same sort of analysis conducted for environmental reviews offers an approach for cooperation between local Virginia governments and land use applicants for producing fact-based application impact analysis that would address the law’s new requirements yet also avoid rezoning moratoria or unnecessary acrimonious debates.

Virginia builders and developers, like their counterparts throughout the United States, are familiar with this aspect of the land use entitlement process – namely, local governments responding to developers’ rezoning applications with comments requesting “voluntary” proffers of funds or property.

Use of an impact statement combined with supportive findings could allow local government and developers in Virginia to comply with the new statute and fashion proffers that achieve common goals for residential development.