System Development Concepts

A System Development Charge (SDC) is a one-time charge imposed on a  developer to equitably recover the cost of expanding infrastructure capacity to serve growth. SDCs are based on:

• Actual cost of infrastructure already built that has "excess capacity"

• Estimated cost of infrastructure that is necessary to support growth (future projects)

Future projects to support growth are identified in formal adopted plans such as the Parks & Trails System Master Plan or the Wastewater System Facilities Plan.

Under state law, SDCs may be set to recover costs for excess capacity and collect anticipated costs for infrastructure expansion. Collected fees may only be used for infrastructure.

City council may set SDC rates at any level up to the maximum allowable charge.

For more information, see System Development Charges -  Issue Brief from the Oregon Legislative Policy and Research Office

Infrastructure is the common or shared facilities that represent a significant investment for our city and includes roads, sidewalks, parks, drinking water, storm water, and wastewater systems. More residents means the need for expanded infrastructure. This is why I have consistently championed for thoughtful growth and to have developers pay their fair share for infrastructure.

Do developers pay their fair share of infrastructure? 

No! Historically the City Council did not set SDCs rates high enough. This means that for years while Sandy was experiencing rapid growth, we were failing to collect enough money to pay for necessary upgrades and expansion. This is a major contributor to the economic crisis we are now facing in order to address our vulnerable wastewater and drinking water systems.

If developers don't pay their fair share of infrastructure, who does pay?

We do! If the City Council does not set sufficiently high SDCs, the burden shifts from developers to current residents and businesses. For infrastructure that has an associated use charge like water and wastewater, the rate charged is based on the actual cost necessary to provide the service. Meaning that if a developer gets a low SDC, we get a higher monthly bill. And for things like roads and parks that don't have a use charge, it means that maintenance is deferred, new parks and roads aren't built, or they are built using money from the general fund, which decreases money available for other services.

But won't charging higher SDCs mean less-affordable housing?

No! It seems reasonable that raising SDCs will increase the cost of a new home or apartment, but lowering an SDC does not equate to a lower cost for most buyers. Sandy has had very low SDCs for too many years. Were houses cheaper because of that? No, the market dictates the price of a house. But what it did do was create an incentive for developers to build here while increasing their profits. A lower SDC means higher profit.

But even if developers were willing to lower profits and sell a house below market value because of a reduced SDC, would it really mean more-affordable housing? Once again, no, because affordability goes beyond the ability to purchase a home. It also has to include the cost to live in that home. Low SDCs translate into higher utility rates decreasing affordability.

But what about the housing crisis? We have to do something.

We do have an affordable housing crisis. But thinking that lowering SDCs will address or even help the crisis is not only misguided, but sets the city on a dangerous financial path that will compromise our ability to maintain our quality of life and our fiscal responsibility.