System Development Charge (SDC) Basics

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Presented by

John Ghilarducci, FCS GROUP Principal

Lane County

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ORS 223.297 - 314, defines “a uniform framework for the imposition of” SDCs, “to provide equitable funding for orderly growth and development in Oregon’s communities”

SDC Background

1. SDCs are one-time charges, not ongoing rates.

2. SDCs are for capital only, in both their calculation and in their use.

3. Properties which are already developed do not pay SDCs unless they “redevelop”.

4. SDCs include both future and existing cost components.

5. SDCs are for general facilities, not “local” facilities.

Key Characteristics

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SDC Components and Calculation

Reimbursement Fee

Eligible value of unused capacity

in existing facilities

Growth in system capacity demand

Improvement Fee

Eligible cost of planned capacity

increasing facilities

Growth in system capacity demand

System Development Charge

per unit of capacity

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Reimbursement Fee Methodology

223.304 Determination of amount of system development charges; methodology; credit allowed against charge; limitation of action contesting methodology for imposing charge; notification request. (1)(a) Reimbursement fees must be established or modified by ordinance or resolution setting forth a methodology that is, when applicable, based on: (A) Ratemaking principles employed to finance publicly owned capital improvements; (B) Prior contributions by existing users; (C) Gifts or grants from federal or state government or private persons; (D) The value of unused capacity available to future system users or the cost of the existing facilities; and (E) Other relevant factors identified by the local government imposing the fee. (b) The methodology for establishing or modifying a reimbursement fee must: (A) Promote the objective of future system users contributing no more than an equitable share to the cost of existing facilities. (B) Be available for public inspection.

Reimbursement

fee methodology

Cost to serve Unused

capacity only

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(2) Improvement fees must: (a) Be established or modified by ordinance or resolution setting forth a methodology that is available for public inspection and demonstrates consideration of: (A) The projected cost of the capital improvements identified in the plan and list adopted pursuant to ORS 223.309 that are needed to increase the capacity of the systems to which the fee is related; and (B) The need for increased capacity in the system to which the fee is related that will be required to serve the demands placed on the system by future users. (b) Be calculated to obtain the cost of capital improvements for the projected need for available system capacity for future users. (3) A local government may establish and impose a system development charge that is a combination of a reimbursement fee and an improvement fee, if the methodology demonstrates that the charge is not based on providing the same system capacity.

Improvement fee methodology

“Demonstrates” is new language

Growth-related

capacity only No double

charging

Improvement Fee Methodology

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required as a condition of development,

identified in an adopted capital facilitiesplan, and

is either off-site or, if on-site,is required to provide morecapacity than needed by thedevelopment in question.

Credits against the improvement fee must be provided for the construction of a capital improvement, which is:

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Credit Requirements (4) The ordinance or resolution that establishes or modifies an improvement fee shall also provide for a credit against such fee for the construction of a qualified public improvement. A “qualified public improvement” means a capital improvement that is required as a condition of development approval, identified in the plan and list adopted pursuant to ORS 223.309 and either: (a) Not located on or contiguous to property that is the subject of development approval; or (b) Located in whole or in part on or contiguous to property that is the subject of development approval and required to be built larger or with greater capacity than is necessary for the particular development project to which the improvement fee is related. (5)(a) The credit provided for in subsection (4) of this section is only for the improvement fee charged for the type of improvement being constructed, and credit for qualified public improvements under subsection (4)(b) of this section may be granted only for the cost of that portion of such improvement that exceeds the local government’s minimum standard facility size or capacity needed to serve the particular development project or property. The applicant shall have the burden of demonstrating that a particular improvement qualifies for credit under subsection (4)(b) of this section.

Credits

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Credit Requirements, continued (b) A local government may deny the credit provided for in subsection (4) of this section if the local government demonstrates: (A) That the application does not meet the requirements of subsection (4) of this section; or (B) By reference to the list adopted pursuant to ORS 223.309, that the improvement for which credit is sought was not included in the plan and list adopted pursuant to ORS 223.309. (c) When the construction of a qualified public improvement gives rise to a credit amount greater than the improvement fee that would otherwise be levied against the project receiving development approval, the excess credit may be applied against improvement fees that accrue in subsequent phases of the original development project. This subsection does not prohibit a local government from providing a greater credit, or from establishing a system providing for the transferability of credits, or from providing a credit for a capital improvement not identified in the plan and list adopted pursuant to ORS 223.309, or from providing a share of the cost of such improvement by other means, if a local government so chooses. (d) Credits must be used in the time specified in the ordinance but not later than 10 years from the date the credit is given.

Many local

governments far exceed minimum requirements

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Sample SDC Calculation

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Average %Transportation Project List 2000 $ 2003 $ [1] to Growth Fee Eligible Unfunded

Street Projects [2] 160,316,098$ 172,110,969$ 44% 75,459,951$ 96,651,018$ Intersection Projects [2] 18,318,000 19,665,703 24% 4,644,511 15,021,192 Alternate Modes - - 0% - -

178,634,098$ 191,776,672$ 80,104,462$ 111,672,210$ less: Existing Fund Balance -

Improvement Fee Cost Basis 80,104,462$

Trip Growth Peak-Hour Trips

Growth in Peak-Hour Trips to Horizon Year 17,332

Improvement Fee Fee

Improvement Fee per Peak-Hour Trip 4,622$

NOTES:

[1] ENR 1/2000 6130ENR 1/2003 6581

[2] City share only; net of State & County funding: $2,806,074

Improvement Fee Calculation

Example Only

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Reimbursement Fee Calculation

Example Only

Average % toSDC-Funded Infrastructure Total Growth [1] Fee Eligible

Projects with Unused Capacity 43,577,251$ 50.2% 21,884,060$

43,577,251$ 21,884,060$

Trip Growth Peak-Hour Trips

Growth in Peak-Hour Trips to Horizon Year 17,332

Reimbursement Fee Fee

Reimbursement Fee per Peak-Hour Trip 1,263$

NOTES:

[1] Weighted average of staff-assigned unused capacity by project.

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Reimbursement Fee Cost Basis

Total Cost of Street Infrastructure [1] 69,405,711$ less: funded by forestry receipts (3,729,531) less: funded by federal / state allocations (1,333,745) less: funded by general fund (2,244,274) less: funded by contributions (9,746,660) less: funded by special assessments (5,273,713) less: funded by gas taxes (455,896) less: miscellaneous funding (3,044,641)

Elgible Infrastructure Costs [2] 43,577,251$

Identified Unused Capacity 21,884,060$

NOTES:

[1] Numbers compiled from financial reports FY 1964 through

4/8/03. Approximations only.[2] Primarily SDC-funded infrastructure; includes developer-

constructed facilities reimbursed with SDCs. Example Only

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Sample Charges

Example Only

Improvement Fee 4,622$ per PHTReimbursement Fee 1,263 per PHT

Subtotal 5,885$ Admin. Cost Recovery 0.44% 26$

Total SDC 5,911$ per PHT

Sample Charges

Customer Type Estimated Peak-Hour Trips [1] SDC Basis1 SFR 1.02 per DU $6,029 per DU2 Apartments 0.67 per DU $3,960 per DU3 General Office Bldg. 1.49 per 1,000 sq. ft. $8,807 per 1,000 sq. ft.4 Specialty Retail 3.45 per 1,000 sq. ft. $20,393 per 1,000 sq. ft.5 Supermarket 7.69 per 1,000 sq. ft. $45,455 per 1,000 sq. ft.6 Light Industry 1.08 per 1,000 sq. ft. $6,384 per 1,000 sq. ft.7 Heavy Industry 0.68 per 1,000 sq. ft. $4,019 per 1,000 sq. ft.

NOTES:

[1] Source: Trip Generation, 6th Edition, Institute of Traffic EngineersP.M Peak Hour Trips. Adjusted for pass-by trips.

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Key Study Issues

Appropriateness / Basis of reimbursement fee

Improvement fee allocation methods / Status of project lists

Basis of charging Parks: Residential DU distinctions /

Commercial?

Transportation: Average daily vs. Peak-hour trip basis

Area-specific charges

SDC credit / indexing policy