Finds that transferring development rights is a market-based technique that encourages the voluntary transfer of growth from places where a community would like to see less development, referred to as sending areas, to places where a community would like to see more development, referred to as receiving areas. Under this technique, permanent deed restrictions are placed on the sending area properties to ensure that the land will be used only for approved activities such as farming, forest management, conservation, or passive recreation. Also under this technique, the costs of purchasing the recorded development restrictions are borne by the developers who receive the building credit or bonus.

Determines that it is good public policy to build upon existing transfer of development rights programs, pilot projects, and private initiatives that foster effective use of transferred development rights through the creation of a market-based program that focuses on the central Puget Sound region.

Requires the department to submit recommendations, findings, and legislative recommendations according to the following schedule: (1) By December 1, 2007, the department shall submit a report to the governor and appropriate committees of the legislature on the progress of the regional transfer of development rights program. The report must also include identification of other candidate transfer of development areas and proposals to modify grant criteria for local governments;

(2) By December 1, 2008, the department shall submit a final report to the governor and the appropriate committees of the legislature on the progress of the regional transfer of development rights program; and

(3) By December 1, 2008, the department shall submit findings and legislative recommendations to the appropriate committees of the legislature to implement the recommendations and strategies identified in the final report.