HomeMy WebLinkAboutItem 03 System Development Charge Temporary Reductions AGENDA ITEM SUMMARY Meeting Date: 11/26/2012
Meeting Type: Work Session
Staff
Contact/Dept.:
Len Goodwin/DPW
Staff Phone No: (541)726-3685
Estimated Time: 20 minutes
S P R I N G F I E L D
C I T Y C O U N C I L
Council Goals: Provide Financially
Responsible and
Innovative
Government Services
ITEM TITLE: SYSTEM DEVELOPMENT CHARGE TEMPORARY REDUCTIONS
ACTION
REQUESTED:
Provide staff direction with respect to options for extending the temporary
reduction of Systems Development Charges.
ISSUE
STATEMENT:
Council has extended certain reductions of Systems Development Charges
(SDC) for larger commercial and industrial development, and requested that
staff provide options for continuing similar reductions for other
development.
ATTACHMENTS Attachment 1: Council Briefing Memorandum
Attachment 2: Value of the Reduction Program to Residential Development.
Attachment 3: Summary of the Status of the Various Local SDC Capital
Project Funds.
DISCUSSION/
FINANCIAL
IMPACT:
Council extended certain reductions in Systems Development Charges with
respect to large commercial and industrial developments on November 19,
2010. At a work session on November 3, council directed staff to prepare
alternatives for temporary reductions on other types of development. Staff
has developed a proposal which would extend the current 50 percent
reduction through June 30, 2013, subject to a monetary limit of $500,000
total during the period January 1 through June 30, 2013. Staff has also
proposed a revision to the Municipal Code to permit payment of such
charges to be deferred until final occupancy, provided the applicant grants
the city a lien on the affected property to secure payment of the fees. Staff
will review those options with Council and seek direction in anticipation of
presentation of a proposal for action at the December 3, 2012 Council
meeting.
ATTACHMENT 1 - 1
M E M O R A N D U M City of Springfield
Date: 11/21/2012
COUNCIL
BRIEFING
MEMORANDUM
To: Gino Grimaldi
From: Len Goodwin, Development and Public Works
Director
Subject: SDC Reductions
ISSUE: Council has extended certain reductions of Systems Development Charges (SDC) for
larger commercial and industrial development, and requested that staff provide options for
continuing similar reductions for other development.
COUNCIL GOALS/
MANDATE:
Financially Responsible and Stable Government Services
BACKGROUND: In February the Council temporarily reduced SDCs in an effort to provide
some local stimulus for the economy. That temporary program was scheduled to end December
31, 2012. At a work session on November 3, Council directed staff to prepare a resolution
extending portions of that program through June 30, 2013. That action, which was presented to
the Council for adoption on November 19, extended a 100 percent reduction in locally imposed
SDCs for development which proposed new construction in excess of 75,000 square feet and
created new job opportunities. At the same time a 100 percent reduction for development which
proposed new construction in excess of 50,000 square feet which would be occupied by an
employer committed to providing in excess of 50 new jobs within one year of occupancy was
also extended.
With respect to other development, which under the February program benefitted from a 50
percent reduction in SDCs, the Council, after discussion, directed staff to return with further
options for extension of the program. During that discussion, Council indicated that it believed
any extension of the reduction in other SDCs should be limited by a dollar maximum reduction,
so as to avoid creating excessive risk to the ability of the SDC Capital Projects Funds to support
capital activity that can be funded through SDCs. Council also indicated interest in reinstituting
a policy under which the payment of certain SDCs could be deferred until building occupancy.
This memorandum deals with options for implementing those proposals. Separately, Council
also directed staff to pursue conversations with the Springfield Economic Development Agency
about extending a program under which SEDA assumes the obligation of locally imposed SDCs
for development in the area of the Downtown Urban Renewal District which conforms to the
requirements of the recently adopted Downtown Urban Design and Implementation Plan.
SEDA staff will be pursuing that conversation.
Deferral of Payment.
Currently the Code contemplates that SDCs will be paid at the time of building permit issuance.
Two exceptions to that practice exist. First, SDCs on residences may be financed by the City and
paid over a 10 year period under Municipal Code Section 3.412(4). Although the Council has
discussed extending that option to cover other forms of development, Council has not elected to
11/21/2012 Page 2
ATTACHMENT 1 - 2
direct staff to expand that option. Second, by long-standing City policy, whenever total local
SDCs exceed $10,000, the applicant has been allowed to enter into a short term deferral
agreement under which $10,000 will be paid at issuance of the permit and the balance paid at
occupancy. In each of these alternatives, the applicant has been asked to give the City a lien on
the property affected, to secure payment of the SDCs.
In 2009, the Council adopted Ordinance 6234, which allowed all applicants seeking to build one
and two family homes to defer payment of local SDCs until final occupancy. Under that process,
the applicant was likewise obliged to give the City a lein on the affected property to secure
payment of the SDCs. That program continued through September 1, 2010.
Options:
Staff recommends that council consider two options for deferring the time of payment of SDCs.
Option 1 would reinstitute that previous deferral program for one and two family residential and
leave the short term deferral for large SDCs in place. Under this option, builders of one and two
family residences could defer all local SDCs to time of occupancy by granting a lien on the
property, and applicants building larger facilities could defer any SDCs in excess of $10,000 to
the time of occupancy.
Option 2 would simply provide that the payment of all local SDCs due could be deferred until
final occupancy by granting a lien on the property affected.
Temporary Reduction of Charges
As mentioned, in the Council work session of November 3, several Councilors expressed
concern about an unlimited 50 percent reduction in SDCs, because of the potential impact on the
ability of the City to fund its capital program. There are several capital projects currently
budgeted or programmed in the in the 2013-2017 Capital Improvement Program currently
relying on SDC revenue for implementation. Any of these projects could be placed at risk by
continued decline in SDC revenues.The following is a sample list of those projects:
Project SDC Funds
“A” Street Overlay $191,387, Transportation Reimbursement
Thurston Rd. Overlay $142,626, Transportation Reimbursement
Franklin NEPA $210,027, Transportation Improvement
Mill Race Stormwater Facility $235,000, Stormwater Improvement
S&T Drainage $74,000, Stormwater Reimbursement
Glenwood Stormwater $240,000, Stormwater Improvement
Wastewater Pump Station Upgrades $1,250,000, Wastewater Reimbursement
Franklin Boulevard Expansion $614,000, Wastewater Improvement
Options:
If Council wishes to extend the 50 percent reductions temporarily it may do so either by limiting
the period of time within which the discount is available, imposing a dollar limit on the amount
of reductions authorized, or limiting the class of developments to which it applies.
11/21/2012 Page 3
ATTACHMENT 1 - 3
Time limit
In considering a time period limit, it is important to keep in mind that, generally, there is limited
development activity in the winter months, even in good economic times. Thus, for example, a
three month extension (through March 31) is unlikely to either have much benefit or much
financial impact, because the level of building activity will be low. A six month extension would
not only likely impact more potential developments but might also accelerate the pace of
development to some extent. Those who are considering developing in calendar year 2013 might
choose to move their activity up to fit within a June 30 deadline, rather than defer their activity
to later in the summer. This could have a positive economic effect in addition to the stimulative
effect of inducing development this year as opposed to some future time.
Class of Development
In considering the class of development to which the discount might apply, staff notes that while
much of the discussion at the November 3 work session related to residential development, the
limited amount of commercial/industrial development activity that occurred since February,
when the current reduction program went into effect, has been smaller scale development which
qualified for the 50 percent reduction, not for the 100 percent reduction. It is, of course, unclear
how much of this development would have occurred were the SDC reduction not in place.
The value of this reduction program to residential development can be seen in Attachment 2,
which shows the all-in fee and permitting costs for two example dwellings. In each case, the 50
percent reduction in SDCs reduces the total cost, including construction and all permits, by
somewhere between 2.0 and 2.2 percent.
Although there is much variability in the cost of commercial/industrial development and in the
SDCs for that type of development, staff believes it is reasonable to assume that the cost
reduction impact that would result from the continuation of the reduction program would be on
the same order of magnitude.
Dollar limit on reduction
Attachment 3 summarizes the status of the various local SDC Capital project funds. While each
of the funds is challenged financially, staff believe that a revenue loss of not more than
$500,000, spread across the six funds, is manageable. Although some of the funds show negative
balances for FY 2014 and 2015, the affects can be addressed by making modifications to the
Capital program to slow the rate of delivery of projects by deferring some actions until later
years. This strategy is probably sustainable for one or two years, but would not be appropriate as
a long term strategy. One caveat to note is that most commercial or industrial development tends
to be transportation intensive, while most residential development generally implicates the local
wastewater funds more significantly. As a result, assuming the reductions are allowed for each
component of the SDC the impact on each fund may be significantly different, depending on the
type of development that occurs over the period of the reduction.
An added complexity to a dollar limited reduction is that there will need to be some method to
resolve what happens as the maximum limit is approached. There may be cases where multiple
applications are submitted, and it becomes necessary to choose which one gets the benefit of the
reduction. Staff proposes that in setting that priority we rely on that date when an application is
approved, not the date of submission. Taking that approach will prevent anticipatory filing of
incomplete applications as a way of locking in the discount, even though there is no immediate
plan to construct. Similarly, staff proposes to prioritize among applications that are complete on
the same date by favoring the last application filed. The net result would be, for those last few
11/21/2012 Page 4
ATTACHMENT 1 - 4
applications where prioritization needs to occur, those who submitted an application and
promptly completed it would receive preference over those where the application was submitted
but allowed to languish before it was deemed complete.
RECOMMENDED ACTION: Staff recommends that Council direct that an ordinance be
prepared for the December 3 regular session allowing for the deferral of payment of SDCs until
final occupancy upon agreement granting the City a lien to secure payment. Staff recommends
that this cover all SDCs for one and two family residential development and all SDCs in excess
of $10,000 for commercial and industrial SDCs. Staff recommends that Council direct this
ordinance be brought forward with an emergency clause to insure that there is no gap following
the expiration of the reductions provided by Resolution 12-02, approved February 6, 2012.
Staff further recommends that Council direct that a resolution be prepared temporarily reducing
by 50 percent, through June 30, 2013, or until reductions totaling $500,000 have been granted
pursuant to this resolution, whichever is sooner, all SDCs except those for which a 100 percent
reduction was authorized by Resolution 12-xx.
Fees
for Single Family Residences
2644 sq.
ft.
1764 sq.
ft.
Value=$234,974.72
Value=$168,708.16
City Fees
Plan Review
817.83
$
643.23
$
Planning
Plan Review
211.00
$
211.00
$
Fire Fee (.05 Per sq foot)
136.80
$
105.85
$
Electrical
234.00
$
272.00
$
Plumbing
374.00
$
374.00
$
Mechanical
195.00
$
170.00
$
Land
Drainage & Alteration Permit
472.50
$
472.50
$
Building
Permit Fees
1,258.20
$
989.58
$
Addressing
38.00
$
38.00
$
Technology
Fee
113.01
$
95.43
$
Sidewalk
& curbcut
161.00
$
161.00
$
* Local
SDC's
Full
Rate
50% Off
Full
Rate
50% Off
11,200.08
$
5,638.73
$
7,663.39
$
3,870.01
$
City Fee
sub tota
l
15,211.42
$
9,650.07
$
11,195.98
$
7,402.60
$
Other
Jurisdictional Fees
Willamalane
3,499.00
$
3,499.00
$
Metro Wastewater SDC's
1,532.80
$
1,532.80
$
State of Oregon
247.34
$
224.47
$
Sub Total
for other jurisdictions
5,279.14
$
5,256.27
$
Grand Totals
20,490.56
$
14,929.21
$
16,452.25
$
12,658.87
$
*This
is
a breakdown of two 3 bedroom 2 bath
homes with
the same fixture count.ATTACHMENT 2
SDC
Financials
FY10FY11FY12
FY13 Estimate
Actual
FY14
Projected
FY15
Projected
Storm ImprovementRevenues
2,515,838
1,874,730
1,794,091
1,776,268
866,078
745,161
Expenditures
728,019
165,297
90,550
1,036,310
316,253
333,738
Balance
1,787,819
1,709,432
1,703,540
739,958
549,825
411,423
Storm ReimbursementRevenues
8,280
41,898
63,682
87,494
117,232
47,997
Expenditures
4,30627,43621,17383,445263,915129,313
Balance
3,974
14,462
42,509
4,048
(146,683)
(81,316)
WW ReimbursementRevenues
926,791
1,090,478
1,297,385
1,327,898
1,372,398
1,567,474
Expenditures
82,865
97,230
189,087
262,901
379,548
1,506,699
Balance
843,926
993,248
1,108,298
1,064,997
992,850
60,775
WW ImprovementRevenues
406,401
439,664
500,071
491,057
563,711
176,508
Expenditures
98,798
82,597
137,254
109,855
697,291
457,276
Balance
307,604
357,067
362,818
381,202
(133,580)
(280,768)
Transp ReimbursementRevenues
554,926
442,949
457,421
461,313
331,275
233,710
Expenditures
189,004
83,418
83,045
251,310
402,036
298,181
Balance
365,922
359,532
374,376
210,003
(70,761)
(64,471)
Transp ImprovementRevenues
3,305,085
3,130,342
1,597,111
1,659,184
1,364,412
715,843
Expenditures
461,288
1,916,521
192,892
553,596
905,999
899,619
Balance
2,843,797
1,213,820
1,404,218
1,105,588
458,413
(183,777)
FY14 and
FY15 are
at 100%
SDCs
Capital
Projects will
need to be reduced each year to meet budget.ATTACHMENT 3