AMA - Wetland Mitigation
I’m purchasing eight acres of Wetlands. Many people do not know the difference between Flood Zones and Wetlands... which limits the amount of people with whom one can discuss options.
The entire site is designated as wetlands. I have an approved permit from the Army Corps of Engineers for a fill pad and building, but NOT a city approved building permit. I would have to apply for and receive a Wetland Development permit from the City. The city requires a 2:1 mitigation ratio (i.e. 2 square feet of mitigation credit for each 1 square foot of wetland filled…). The city also requires undisturbed wetland areas to remain in a natural wetland state, so the yard surrounding the proposed building will have to be natural. This means no topsoil and sod is allowed for a manicured lawn, and the only plants or landscaping allowed have to be wetland species plants and trees, no invasive species or non-native wetland landscaping that are typical in a normal, suburban yard landscape.
What are some creative ways to use or leverage wetlands? Perhaps borrow against the land as collateral? Or dig in for the long haul and seek mitigations in order to develop?
This is a great question. The question of land value is one that varies widely based on the designation of the land. In my experience, land increases in monetary value only when it has development potential.
Land that is zoned rural or agricultural, or environmentally protected is worth very little. You could have the exact same land zoned for residential that sells for $800,000 an acre. That exact same land zoned agricultural or environmentally protected might be valued at $4,000 an acre. We’re talking a 20x increase in value.
Wetland mitigation is a designation worth getting for a property. You are correct that in some cases, a property with a wetland designation doesn’t necessarily mean it’s not suitable for development.
For example, it could mean that the water table is buried only to a shallow depth beneath the surface. If it’s wet, it could affect the geotechnical stability of the soil It might mean driving piles down 40 feet or until you hit bedrock before in order to create a stable substrate to build a structure on top. A conventional cement foundation may not work in a wetland situation. So your cost of construction could be higher.
The range of Wetland mitigations vary widely. At one end of the spectrum, you simply write a check to the relevant authority and they give you a certificate of mitigation.
That form of mitigation is called compensatory mitigation. If you’re going to be negatively affecting a wetland, then the state may want some money in exchange to protect other wetland.
Generally, mitigation obligations are not assessed on an acre for acre basis. Unavoidable net losses to wetland ecological value resulting from a project are quantified as habitat units using the appropriate Wetland Value Assessment (WVA) model. You can trade these habitat units resulting from a monetary mitigation action to equal the habitat units lost.
At the other end of the spectrum, you could spend a ton of money and resources and get absolutely nowhere.
Creating a mitigation bank is a complicated high-risk, high-return venture that requires a high-level of specialized expertise. At the very least, you will need to enlist the help of several highly qualified, experienced consultants to navigate the multi-step process.
Another option to create value would be to develop a portion of the property and then donate a portion permanently to conservation using a conservation easement. The tax benefit of the conservation easement could be substantial since the value of the land for tax purposes might be assessed at its highest and best use, rather than its value as a wetland.