I don’t think that I’m breaking the news to anyone that the entitlement process for real estate development, residential or commercial, has been a point of contention in our community. Let me assure you that in my experience, the entitlement process isn’t anyone’s idea of a good time no matter where you are. Let’s examine what entitlements are, why you should care about them, and identify some tips and techniques on how to effectively manage the entitlement process here in Tullahoma.
It is worthy of note that the current administration has made great strides recently to streamline and communicate the process in a way that is clear for everyone. I’ve steeled myself for the social media barrage for what I am about to say, but if you are one of the unfortunate residents who have had issues with entitlements in Tullahoma, was your problem with the people, or was it with the process? I hope that we can all at least agree with the fact that the current administration has attempted to identify room for improvement and is actively working to make the process easier for everyone is commendable.
First, what exactly are entitlements? Entitlements are the legal rights conveyed by approvals from governmental entities to develop real property for a certain use, intensity, building type, or building placement. Each year, the real estate development process in America increasingly grows more complex and the entitlement process is a significant factor influencing the trend. That is why more and more MRED programs are being developed at universities each year. Over the last several decades, the real estate industry has matured to one with great complexity, creating a demand for practitioners who possess a comprehensive knowledge of real estate beyond that of traditional MBA generalists. The reason why things can get sticky when it comes to entitlements is that they can be a major factor in the ultimate use, viability, and the value of a piece of property. Entitlements come in the form of land use or subdivision approvals, zoning, site plan approvals, and permits at the local level and every municipality is different. The Urban Land Institute does a pretty good job of explaining the entitlement process like a multi-layer cake and it is important to remember that each layer can prevent a project from going forward. As developers and builders work their way up from the bottom of the cake to the top, the more vested rights a project has, and the feasibility and value of the development increases.
The bottom layer of the cake and the foundation for the whole process is a municipality’s comprehensive plan. The important thing to remember about comprehensive plans is that they are basically a long-term vision of where the city would like to be five or 10 years down the road. Think of them as a blueprint for the future. Comprehensive plans generally don’t have “teeth,” meaning they are typically not enforced. Some courts have occasionally been known to stop or order the demolition of development in violation with a comprehensive plan, but it is rare. That being said, savvy developers know that proposing a development that is totally out of character with a comprehensive plan is going to be like pushing a boulder up a hill and not worth the R.O.B. (return on brain damage).
The next layer of the cake is zoning ordinances. Zoning ordinances are land-use regulations that do have “teeth” and they are informed by the comprehensive plan to ensure that the municipality at least attempts to head in the direction it sets forth in its comprehensive plan. Euclidean zoning is both one of the earliest and the most common form of land-use regulation in the United States. Euclidean zoning is essentially single-use zoning where sections of the city are designated for a single type of use (i.e. Homes go here, offices go there, industrial goes there, etc.). In my opinion, single-use zoning is on its way out as more and more communities begin to adopt form-based codes, but that’s a topic for another day.
Next up, you have your land development, or subdivision, regulations layer. This is where the real fun usually begins. These are your land development codes and regulations. They include specific requirements for new development such as building height, setback and minimum lot dimensions. The subdivision regs also include requirements for dividing land, site plan and engineering approvals, and any other requirements to be met before you reach the final, delicious top layer of the cake where permits are issued to begin building horizontal improvements (buildings). A developer is not able to receive building permits until the requirements identified in the subdivision regulations are met. Subdivision regulations are also where any impact fees, exactions or other government requirements are imposed. When I was working in land acquisition for Drees Homes in Metro Davidson and surrounding counties, our company was often required to pay upwards of $30,000 in school impact fees per home. There’s some good news for builders in Tullahoma, at least you don’t have to factor that into your pro forma. Ouch.
The cake analogy is a very simplistic overview of the basic entitlement process, so always remember that there are many other regulations by state and federal agencies that can come into play. State and federal environmental permitting requirements are a well-known example. If you find an old tomb stone and aren’t made of money, I would probably recommend you move on to your next project. If this sounds really complicated, that’s because it really can be. That is why I think it is important to highlight the service Tullahoma provides residents, builders, and developers by creating a “one-stop” shop to help guide anyone thinking about starting a project or actively engaged in a development project through the process. Every Wednesday morning at 8am a business development advisory committee regularly convenes to answer any questions about building in Tullahoma. The persons or organizations in regular attendance include everyone from the Fire Marshall to representatives of the utility companies. Having worked as a development professional in numerous cities of all sizes in multiple states, I can vouch for the fact that this is actually a huge convenience. Tracking down officials while navigating the entitlement process in other municipalities is a full-time job in many development firms, and a high-paying one at that.
I will leave you with just a few tips of the trade for anyone preparing to attend one of these development meetings. First, community buy-in is always a good thing if you are planning a major project. Talk to your neighbors before so that you don’t have to worry about opposition to your project later. Read the comprehensive plan before you start conceptualizing your project. If your goals are in alignment with the city’s vision, you’ve already scored a big win. Try to factor in sustainable development practices whenever possible. Have a clear understanding of how much of your land is developable. It’s also a good idea to check if the property is located along a state road. If it is, it doesn’t mean you can’t build there, it just means there are an extra layer of TDOT requirements that you need to be aware of. Development can be stressful, especially as there is usually a lot of money on the line; however, try to remember that the city is actively engaged in trying to make improvements to the process. Try to walk into the meeting with an open mind and don’t go into the meeting with a defensive mindset. Do not ever take the discussions or decisions personally. Finally, and I cannot stress this one enough, please understand that the International Building Codes (IBC) are universal regulations to protect the safety of you and your family, or your customers. Tullahoma did not write the IBC and cannot change the IBC. Building codes are just part of the construction process that we all have to abide by. Yes, some of them are unreasonable. I get it. But getting angry with the administration about the IBC is like yelling at your waiter at a restaurant because your steak isn’t cooked right.