SYSTEM DEVELOPMENT CHARGES
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1 L E A G U E O F O R E G O C I T I E S SYSTEM DEVELOPMET CHARGES SURVEY OF OREGO CITIES Executive Summary JUE 2001 Published by the League of Oregon Cities
2 SDCs in Oregon Cities: Summary of Survey Results Background System Development Charges fees collected by local governments to offset the costs of public improvements associated with new development have formally existed in Oregon for almost three decades. Corvallis was the first city in Oregon to enact an SDC ordinance, 1 which became effective in January 1972; a referendum in March of that year confirmed the city council s decision. 2 At a state level, legislation regulating SDCs was first enacted in 1989 to, provide a uniform framework for the imposition of system development charges by governmental units for specified purposes and to establish that the charges may be used only for capital improvements. 3 The statutes define the purposes and limitations on these charges, and, despite activity each legislative session, have not changed substantially since their enactment. 4 According to the definition in the statutes, "system development charge" means a reimbursement fee, an improvement fee or a combination of assessed or collected at the time of increased usage of a capital improvement or issuance of a development permit, building permit or connection to the capital improvement. System development charge includes that portion of a sewer or water system connection charge that is greater than the amount necessary to reimburse the governmental unit for its average cost of inspecting and installing connections with water and sewer facilities. 5 Under Oregon law, system development charges may be charged for capital improvements associated with: (a) water supply, treatment and distribution; (b) waste water collection, transmission, treatment and disposal; (c) drainage and flood control; (d) transportation; or (e) parks and recreation. The SDC can consist of a reimbursement fee (for already-existing capital improvements), an improvement fee (for capital improvements to be constructed) or a combination thereof. It is assessed or collected at the time of increased usage of a capital improvement or issuance of a development permit, building permit or connection to the capital improvement. The methodology for determining a city s SDCs is not fixed in statute; rather, the statutes require linkages between the charges and current or projected development; they also require that capital improvements on which SDCs will be spent be included in the city s capital improvement plan. Project description System Development Charges (SDCs) have become an increasingly important source of development revenues for many of Oregon s cities in recent decades. Unlike other states, The Impact of Systems Charges, Bureau of Governmental Research and Service, December 1976, as quoted in Systems Charges in Oregon Cities, State of Oregon Legislative Research, January Systems Development Charges, G. Eugene McAdams, City of Corvallis, circa ORS (1999) More substantial modifications were made during the 2001 legislative session in the form of HB 2980, although these changes served primarily as clarifications to existing law. ORS (1999)
3 however, no comparative data exists on the rates charged for parks, sewers, water, and transportation development. This information is supposed to provide cities that are considering SDCs useful parameters for rates. The data gathered in the project will provide an important service to Oregon s municipalities and students of Oregon local government. The project used a voluntary self-administered mail questionnaire. Mail surveys were sent to City Managers (or administrative equivalents) in each of Oregon s 240 cities in February, A second survey with a reminder was sent out in the beginning of March, In total, 190 surveys were returned for a response rate of 79.2%. The survey data was completed by population numbers for each city on April1, 1990 and July 1, 2000 (obtained from Portland State University Center for Population Research and Census at as well as an indication for the county. Preliminary results The following series of filter questions was used to identify those cities administering SDCs: Does your community have SDCs? (Q-1) Does your community have a Parks SDC? (Q-2) Does your community have a Sewer SDC? (Q-3) Does your community have a Water SDC? (Q-4) Does your community have a Transportation SDC? (Q-5) Yes Parks 38.4% Sewer 64.2% Water 63.7% Transportation 36.8% Storm Water* 7%* SDCs (general) 71.6% * Storm Water SDCs had not been included into the survey, but were nevertheless reported by 13 cities. Some of them provided data regarding the composition and average amount of fees. However, this data is incomplete and cannot be regarded as representative. In some rare cases certain SDCs were reported to be collected not by cities but rather but various agencies, such as Unified Sewer Agency, Washington Co., Eugene Water and Electric Board, Tigard Water District, Bear Creek Sanitary Authority. A number of small cities share SDCs with greater ones because of merged systems. Q-8. If you do not now have SDCs, do you anticipate adopting them in the next 12 months? Yes o Maybe 27% 72% 2% 60 In several cases, however, those cities that already have been charging SDCs of some type, responded this question with specification of particular types of SDCs they were planning to adopt in addition to existing ones. 2
4 If yes, for which purposes? Parks Water Sewer Transportation The offered response categories turned out to be not generally sufficient, as in many cases, city managers would like to adopt more than one SDC, or a Storm Water SDC, which was not listed. Parks 11% Water 16% Transportation 21% Storm Water 5% Parks and Sewer 5% Parks and Transportation 5% Parks, Water, and Transportation 5% Water, Sewer, and Transportation 10% All 21% 19 It is important to note that most cities include adopting Transportation SDC in their plans, either separately (21%), or in combination with other SDCs. Plans of adoption were described in more detail by some respondents (see attached responses to Q-8). Year of implementation Interval Mean Mode Parks Sewer Water Transportation Waiving SDCs Q-7 Does your city waive SDCs under any circumstances? Yes o Possibly 29% 70% 1% 118 Circumstances necessary in order for SDCs to be waived, as well as other related comments are contained in the detail pages. 3
5 Anticipated changes Q-8 Do you anticipate changing your SDCs in the next 12 months? Yes o Maybe 45% 52% 3% 126 If yes: Increase? Decrease? Increase Decrease Both Do not know 94% 0% 2% 4% 52 About half of the cities anticipate to change their SDCs in the next 12 months, although some of them are not yet clear about their plans. However, almost all of those planning to change SDCs are going to increase them. More specific plans to modify the fee were described by some respondents (see the detail pages). Development of SDC methodology Q-9. Has your city used, or is it presently using a consultant to develop SDC methodology? Yes o 58% 42% 163 Are you satisfied with the work product? Yes o ot completed 93% 1% 6% 85 ames of consultants and cost of services were provided by most of respondents who were using consultants to develop SDC methodology. The latter appears to vary in orders of magnitude depending on the city size and subsequent amount of work. See the detail pages for more information. 4
6 Particular SDCs For more detailed information on currently administered SDCs, the following specifications were used: Residential home: Single-family, 3-bedroom home Lot size:...9,000 sq. ft. Building size:...2,000 sq. ft. Development value:...$100,000 Land value:...$35,000 Parking spaces:... 2 Water meter size (inches):... 3/4 Water flow (gallons/mo.):...6,000 Fixture units:...16 umber of employees:... /A Office building: Professional building for general office use Lot size:...47,260 sq. ft. Building size:...20,000 sq. ft. Development value:...$850,000 Land value:...$105,000 Parking spaces: Water meter size (inches):... 2 Water flow (gallons/mo.):...33,000 Fixture units: umber of employees: Within the responses, improvement fee means a fee for costs associated with capital improvements to be constructed. Reimbursement fee means a fee for costs associated with capital improvements already constructed or under construction. Parks SDC (Q-2) SDCs in this group are charged primarily for residential development, while in some cases they are charged for both residential and non-residential development. The fees are usually comprised of development fees. Charged for (b): Residential on-residential Both development development 28.9% 0.0% 9.5% 117 Comprised of (c): Development fee Reimbursement Both fee 23.7% 1.1% 8.4% 63 The basis of the fee (d) varies, with the number of dwelling units being most frequently used. However, there are many cases of using different bases, or flat fees. Please see the detail pages for more information. 5
7 Average fees (e): Mean Standard Deviation Residential home $ Office building $5, Sewer SDCs (Q-3): SDCs in this group are charged primarily for both residential and non-residential developments, while in some cases they are charged for residential development only. In the majority of cases, the fees are comprised of development fees or both development and reimbursement fees (about equal percentage), while in some cases they are comprised of reimbursement fees only. Charged for (b): Residential on-residential Both development development 8% 0.0% 92% 119 Comprised of (c): Development fee Reimbursement Both fee 41% 13% 46% 109 The basis of the fee (d) varies, with Equivalent Residential Units (ERU) being most frequently used. However, there are many cases of using different bases. Please see attached responses for more detail. Average fees (e): Mean Standard Deviation Residential home $1, , Office building $12, , Water SDCs (Q-4): SDCs in this group are charged primarily for both residential and non-residential developments, while in some cases they are charged for residential development only. In the majority of cases, the fees are comprised of development fees or both development and reimbursement fees (about equal percentage), while in some cases they are comprised of reimbursement fees only. 6
8 Charged for (b): Residential on-residential Both development development 7% 0.0% 93% 117 Comprised of (c): Development fee Reimbursement Both fee 44% 10% 46% 108 The basis of the fee (d) varies, with water meter size being most frequently used. However, there are many cases of using different bases. Please see attached responses for more detail. Average fees (e): Mean Standard Deviation Residential home $1, , Office building $9, , Transportation SDCs (Q-5): SDCs in this group are charged primarily for both residential and non-residential developments, while in some cases they are charged for residential development only. In the majority of cases, the fees are comprised of development fees only, while in some cases they are comprised of both development and reimbursement fees or reimbursement fees only. Charged for (b): Residential on-residential Both development development 4% 0% 96% 71 Comprised of (c): Development fee Reimbursement fee Both 73% 5% 22% 66 The basis of the fee (d) varies, with trip generation according to the ITE manual being most frequently used. However, there are cases of using different bases. Please see the detail pages for more information. 7
9 Average fees (e): Mean Standard Deviation Residential home $1, Office building $29, ,
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