| Systems development charges, or SDCs, are fees that local governments in Oregon charge in order to compensate for at least some of the impact that housing growth has on a community. The concept of SDCs is similar to that of the Mello-Roos tax in California, where municipalities charge residents an annual tax to
repay loans taken out for improvements like schools and parks, which are typically needed to compensate for the influx of new residents created by new housing construction.
In Oregon, however, SDCs amount to one-time fees that are charged to a builder or developer whenever a new building or subdivision is constructed.
While Oregon SDCs once differed from the Mello-Roos tax because they were not
allowed to be used for education-related expenses, Oregon law recently began
allowing local school districts to collect SDCs for
construction of facilities and for acquisition of furnishings, such as chairs,
desks and computers.
Oregon law still does not allow SDCs
to be used to fund operating costs of school districts, nor such costs for other
agencies. The fees are allowed only for capital improvements, which means paying for the purchase of equipment
and construction of facilities. The law also limits use of the fees to certain
types of agencies. Public safety agencies, such as local police and fire
departments, are not allowed to collect SDCs.
The legislature's intent when it created the law allowing SDCs was to make new developments pay to offset the impact those developments were having on residents who were already living in the communities where the developments sprang up.
Before lawmakers in 2007 added school districts to the list of agencies that
could collect SDCs, the fees were allowed to be collected to pay for drainage and flood control, parks and recreation, transportation, water systems
and sewage systems.
Some agencies not allowed to collect
SDCs often complain that legislative restrictions make it difficult for their agencies to adjust rapidly enough to meet increased demands
for services caused by population growth. On the other hand, many advocates for causes such as affordable housing, property rights and lower taxes argue that making developers alone pay to alleviate the effects of growth is an unfair burden. Developers only pass the costs on to home buyers, making lower
priced homes even less affordable. Moreover, new home buyers pay to compensate for the impact of their new housing, but other residents also reap benefits from the SDCs collected, even though those residents didn't pay.
SDCs can be quite high in some municipalities, and economists and other experts say high SDCs in some areas, such as the City of Portland, are driving population from those areas.
Portland charges SDCs on all types of residential construction, as well as on development of commercial and industrial properties. The city's SDC charges on a typical single-family home in 2004 totaled $7,981, which included $1,630 for parks, $1,596 for transportation, $2,335 for water, and $2,420 for sewers.
Portland's SDC charges are in addition to all the costs that developers are required to pay for street, sidewalk and lighting improvements, sewer connections, water connections, design review, permit and inspection fees, and so on.
SDCs can add as much as about 6 percent to the price a buyer pays for a single-family home, depending on a home's location, size, features and the municipality where it's built. The added cost for a home can climb to
around 11 percent when all governmental fees are included. |
