HomeMy WebLinkAboutItem 01 Transportation System Systems Development Charge (SDC) Methodology Update - Receive Citizen's Advisory Committee and Staff Recommendations AGENDA ITEM SUMMARY Meeting Date: 5/19/2014
Meeting Type: Work Session
Staff Contact/Dept.: Len Goodwin/Anette Spickard
Staff Phone No: 726-3697
Estimated Time: 30 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: TRANSPORTATION SYSTEM SYSTEMS DEVELOPMENT CHARGE (SDC)
METHODOLOGY UPDATE – RECEIVE CITIZEN’S ADVISORY
COMMITTEE AND STAFF RECOMMENDATIONS
ACTION
REQUESTED:
Receive report and recommendations from the Citizen’s Advisory Committee
(CAC) for the Transportation System SDC methodology update and give direction to staff for recommendations to be included in the final version of the methodology.
ISSUE
STATEMENT:
The Council appointed the CAC in September 2013 and assigned specific policy
questions for the CAC to review and provide recommendations to Council for the methodology update. Based on Council direction at this work session staff will
incorporate any or all of the recommendations into the draft methodology and bring
back to Council for review and discussion of the resulting rate structure. Staff will then issue the statutorily required public notices announcing the availability of the
methodology for review.
ATTACHMENTS: 1. Council Briefing Memo 2. Memo to Council from CAC with recommendations
DISCUSSION/ FINANCIAL IMPACT:
City staff is in the process of updating the System Development Charge methodology for the Transportation System. Transportation System SDC’s were
last reviewed and updated by Council in 2008. The Council adopted the city’s new
Transportation Systems Plan (TSP) on March 11, 2014. The TSP will form the new project list used in the SDC methodology as part of the process to set SDC fee
levels.
The CAC is an important part of the public process to review and evaluate the
proposed methodology for the SDC update. After the Council appointed the membership and assigned the policy issues to the CAC, they met monthly with city staff and the consultant between October, 2013 and April, 2014. The CAC reached
consensus on all policy issue recommendations and presents its report as Attachment 2. Staff recommendations are included in the Council Briefing Memo.
M E M O R A N D U M City of Springfield
Date: 5/19/2014
To: Gino Grimaldi COUNCIL
From: Len Goodwin, DPW Director
Anette Spickard, DPW Deputy Director
BRIEFING
Subject: Transportation System Systems Development Charge (SDC) methodology update – Receive Citizen’s Advisory Committee and staff
recommendations
MEMORANDUM
ISSUE: Shall the city incorporate recommendations from the SDC Citizen’s Advisory
Committee and staff regarding policy issues identified by Council for the Transportation System SDC methodology update?
COUNCIL GOALS/
MANDATE:
Provide Financially Responsible and Innovative Government Services
BACKGROUND: City staff is in the process of updating the System Development Charge methodology for the
Transportation System. Transportation System SDC’s were last reviewed and updated by
Council in 2008. The Council adopted the city’s new Transportation Systems Plan (TSP) on March 11, 2014. Projects from the TSP will form the new project list used in the SDC
methodology as part of the process to set SDC fee levels. The CAC was an important part of the public process to review and evaluate the proposed
methodology for the SDC update. After the Council appointed the membership and assigned the policy issues to the CAC, they met monthly with city staff and the city’s consultant, Deb Galardi of Galardi Rothstein Group, between October 2013 and April 2014. The CAC reached
consensus on all policy issue recommendations and presents its report as Attachment 2. In addition to the work of the CAC, staff reviewed statutory and technical components of the
methodology with the City’s consultant. In order to proceed with the final methodology preparation, Council is asked to review the CAC’s recommendations along with the staff’s
corresponding recommendations and determine which of those to include in the methodology.
A full discussion of the issues and recommendations are included in Attachment 2. Issue #7 is also included in this Council Briefing Memo for Council’s review as the CAC and the staff have
different recommendations for Council to consider. Staff is in concurrence with all other
recommendations of the CAC.
In addition to reviewing the policy issue recommendations from the CAC, staff requests Council review and provide direction on two key assumptions for the methodology: 1) Amount of external funding for roadway projects and 2) Allocations of Bicycle/Pedestrian improvements to
growth.
Amount of External Funding for Roadway Projects (Local Projects)
For the purpose of developing the improvement fee portion of the SDC (cost of new projects attributable to growth) the City must first prepare a cost estimate for the local projects that add
capacity to the system from the Transportation System Plan that are expected to be completed in
Attachment 1, Page 1 of 3
MEMORANDUM 5/15/2014 Page 2
the 20 year planning horizon. The City then deducts an amount that is expected to be paid by external sources (e.g. assessments, grants, exactions). The cost is then further reduced for
“through trips” (trips that are not specifically generated by the development paying the SDC
charge) resulting in a net project cost that is included in the SDC.
The City’s current methodology uses an across the board assumption that 60% of local project
costs will be paid by external sources. Based upon a review of completed projects since the City’s last update in 2008, external funding sources provided on average 70% of the project
costs. The City can consider using different assumptions for external funding by assigning
specific percentages to each project in more granular detail however, staff recommends using 70% as the external funding assumption across the board for this methodology update since it is
based on our current experience. The Citizen’s Advisory Committee discussed this issue as well and felt comfortable with the staff’s recommendation. Increasing the external funding assumption from the current 60% to the proposed70% will decrease the cost of the projects
included in the SDC rates and therefore will have a downward impact on the overall rate.
Allocations of Bicycle/Pedestrian Improvements to Growth The City has two options for how to allocate the costs of bicycle/pedestrian improvements to
growth. The City can make an assumption that 20% of all bicycle/pedestrian projects will be
paid by growth by applying the overall percentage growth of auto trips predicted in the City’s 20 year traffic model. This is not accurate but absent specific bike trip data it is defensible as an
assumption. Or the City can use a “Level of Service” approach to determine the amount of
bicycle/pedestrian projects to be paid by growth. This approach is becoming more commonly used by cities because it considers planning standards for bike and pedestrian facilities.
Specifically, this method determines the planning standard as the bike and pedestrian
infrastructure miles per capita at the end of the 20 year period. The total miles needed for existing and future development are then determined by multiplying the planned miles per capita
by the population of each group. Existing facilities are assumed to meet the capacity needs of existing development first, with any deficiency met through new facilities. The portion of future bike and pedestrian projects paid by growth is equal to the total costs less any existing
deficiencies. The “Level of Service” approach results in more of the project costs being attributable to growth than using the flat 20% assumption but is more accurate and ensures that funds will be available to build planned projects in the adopted TSP. The Citizen’s Advisory
Committee discussed this issue and felt that the Council should consider both approaches and make a determination of which to use based on the Council’s best judgment. Staff recommends
using the “Level of Service” approach. The current methodology assumes 30 percent of
bicycle/pedestrian projects are paid with SDCs. Reducing the assumption in the current methodology from 30% to 20% decreases the amount of the Bicycle/Pedestrian project costs that
are included in the overall SDC rate. Changing the methodology to the proposed “Level of
Service” approach will increase the amount of the Bicycle/Pedestrian project costs that are included in the overall SDC rate.
Issue 7 from CAC Recommendation Memo: Should Council policy allow commercial/industrial ratepayers to defer payment of SDC’s over
time similar to that allowed by residential ratepayers? (Does not impact rate formula, but rather cash flow to the SDC Fund.) CAC Recommendation: Yes, expand financing program to include commercial/industrial development. Ensure repayment through lien and charge a market interest rate. (One member does not want the city to charge interest to commercial/industrial developers.)
Staff Recommendation: Continue with city’s current practice of allowing commercial/industrial
developers to make a down payment on SDC’s at application and pay the balance upon
occupancy. Staff can adjust the formula for the down payment if Council desires.
Attachment 1, Page 2 of 3
MEMORANDUM 5/15/2014 Page 3
Analysis: Consistent with ORS 223.208 (the Bancroft Bonding Act), the City’s current SDC ordinance
allows the purchaser of a home or multifamily dwelling to finance system development charges
over a period of 10 years, under certain conditions. The purpose of the Bancroft Bonding Act) is to provide purchasers of homes or multifamily dwellings with Bancroft financing of system
development charges as an alternative to absorbing those charges into the long-term permanent
financing of their homes. [1977 c.722 §2]
No such provision is currently provided for commercial/industrial development. Some other
communities, like the City of Portland, allow financing for all development types through installment loans or a deferral contracts secured by a lien on the benefited property. Loan
requirements are consistent with City of Portland installment contract policies, including:
• All property owners of records must sign an installment contract.
• The SDC financing installment contract creates a lien on the property.
• For installment loans, applicants may select monthly payments for 5- or 10-year periods.
For amounts over $2,500, applicants may select semi-annual payments over a 20-year period. Deferral contracts are offered for 3, 6, or 12 month periods based on the stated
project value.
The CAC evaluated the following options and pros and cons of each.
Options: 1. Do not expand SDC financing program to commercial/industrial development (maintain
current approach)
2. Expand SDC financing program to include commercial/industrial development
Pros of expanding financing option to commercial/industrial development (Option 2):
• Allows developers to spread payments over multiple years, to reduce upfront cost
Cons of expanding financing option to commercial/industrial development
• Reduces annual revenue collected by the city
• Additional administrative time and costs for city
• Additional financing costs for developer
RECOMMENDED ACTION: Direct staff to include the recommendations from the CAC in the Transportation System SDC
methodology update except for recommendation #7; and include staff’s recommendation for #7. Further direct staff to use a “Level of Service” approach for the Bicycle/Pedestrian facilities and an assumption of 70% external funding for all roadway projects.
Attachment 1, Page 3 of 3
M E M O R A N D U M
Date: 5/19/2014
To: Mayor Lundberg and the Springfield City Council
From: The members of the Transportation Systems SDC Citizen Advisory Committee
Subject: Transportation System Systems Development Charge (SDC) methodology update – Citizen Advisory Committee Recommendations
The Council appointed the SDC-CAC in September 2013 and assigned specific policy questions
for the CAC to review and provide recommendations to Council for the City’s SDC methodology update. The members of the SDC-CAC are:
Councilor Bob Brew Planning Commissioner Tim Vohs
Dan Egan, Springfield Chamber of Commerce
Ed McMahon, Home Builders Association Garry Swanson, Chair of Springfield Bike/Pedestrian Advisory Committee
Frannie Brindle, ODOT Area 5 Manager
Chris Kline, Summit Bank – Commercial Lending Leonard Tarantola, Springfield property owner and developer
We completed our work on April 16, 2014 and our recommendations are presented to you in this document.
BACKGROUND:
City staff has undertaken a review of the existing methodology created to establish rates for
Transportation System Systems Development Charges (“SDC”). Council last reviewed and updated the Transportation System SDC methodology in 2000. In 2008 Council reviewed the
methodology and no changes were made other than to update the project list and rates. The
Council adopted the city’s new Transportation Systems Plan (TSP) on March 11, 2014. The TSP will form the new project list used in the SDC methodology as part of the process to set SDC fee
levels.
An important component of this review was the use of a Citizen’s Advisory Committee (“CAC”)
to work with staff to evaluate the methodology and provide input and recommendations to the Council prior to adoption of the new rates. At the September 9, 2013 worksession the Council created the CAC and assigned specific policy issues to be reviewed for recommendation back to
Council. The CAC met six times between October 2013 and April 2014 and reviewed the
methodology and policy issues. The CAC also received information regarding transportation SDC’s charged by all other Oregon cities for comparison. The CAC reached consensus on all
policy issues and forwards the following recommendations to Council.
DISCUSSION:
Attachment 2, Page 1 of 8
The CAC examined the policy issues using the following objective evaluation criteria:
• Equity – is the fee in proportion to the system impact
• Defensibility – is the methodology consistent with the law and other communities
• Administrative Feasibility – is the data available to support the methodology
• Public Understanding/Acceptance – is the methodology simple to understand and fair
The formula for determining Transportation SDC’s is illustrated in the following chart and this
framework was used by the Committee to understand how their policy recommendations ultimately impacted the SDC.
Issue 1: Should City’s match for State and Federal projects be included in methodology?
(impacts “Growth Costs”)
CAC Recommendation: Yes, assume 10% match requirement
Staff Recommendation: Concur
The 20 year project list identified in the city’s adopted Transportation System Plan (TSP) includes costs for needed improvements on State-owned facilities. While a combination of State
and Federal funding will be required for construction of these improvements, in many cases a
local funding ‘match’ will likely be required. In the current methodology, the SDC project list assumed 25 percent local match for State-owned facilities, but the actual amount is often the
subject of negotiation at the time a project is prepared for delivery. Staff reviewed the status of
current projects with the committee as examples for the committee to use in consideration of this policy issue. The committee discussed the following options and the pro’s and con’s of each.
Options: 1. Continue current practice of including 25 percent local funding match on State facilities
2. Assume a different percent local funding match (there is no official standard amount currently) 3. Exclude costs of improvements to State facilities until such time as the local funding
requirements are known. At this point, the project list (and SDC) would be updated to include the SDC-eligible portion of the local funding requirement.
Pro’s of including match in methodology:
• Options 1 and 2 keep same approach and so methodology is consistent with prior
methodology.
Attachment 2, Page 2 of 8
• Building in this cost eliminates the need for the city council to revisit the SDC project list and adjust SDC rates each time a State/Federal project is negotiated.
• The city’s competitiveness to obtain State/Federal funds for projects is enhanced when the city has match funds identified and available.
• The match amount included in the SDC is only for that portion of the project attributable to growth.
• Option 3 provides for a more accurate project cost and more accurate SDC assessment.
• Option 1 and 2 ensures all new development pays the same rate from the beginning
instead of assessing higher rates to those who develop after the matching costs are included.
Con’s of including match in methodology:
• Options 1 and 2 increase individual project costs and therefore increase the overall SDC
rate.
• Including a generic match estimate up front (Options 1 or 2) may result in inaccurate
SDC collection as actual match requirements on projects may be higher than 25%, less
than 25% or none at all.
• None of the options provide funds for the full match amount; the city will still need to
identify other sources of funds to meet the full project match.
Issue 2: Should the costs associated with debt service be included in the project costs for
purposes of the SDC methodology?(impacts “Growth Costs”)
CAC Recommendation: Do not include debt service cost in the methodology until/unless the city decides to issue revenue bonds for projects that are backed by SDC’s.
Staff Recommendation: Concur
Historically, the City has issued General Obligation (GO) bonds to fund some improvements to
the transportation network. General Obligation bonds require voter approval and are repaid
through property taxes assessed to all real and business personal property within the city limits. Because the GO-bond funded projects are ultimately paid by another revenue source (property
taxes), these projects are often excluded from the SDC project list. The City’s current transportation SDC methodology excludes currently outstanding GO bond principal (used to finance past transportation system capacity) from the reimbursement fee calculation. Debt
financing costs (issuance costs, interest, bond counsel expense, etc.) are currently excluded from the improvement fee calculation.
The CAC discussed future potential street funding options for transportation system
preservation. For example, if the City were to adopt a Transportation Systems Maintenance Fee, like many other cities in the State, other debt instruments such as revenue bonds may be
available for long-term financing of street improvement. In this case, SDCs represent a potential
source of funding for debt service, including financing costs. However, the use of debt financing for future system improvements is difficult to predict (in terms of timing, structure and
financing costs).
Previous CAC’s that have reviewed this issue for wastewater and stormwater SDC’s recommended that debt financing costs should not be included in the initial project cost but
included at the time that debt is actually issued (and the costs are therefore known). The city can then update the project costs and adjust the SDC accordingly. This CAC weighed the following options and pros and cons in making their recommendation.
Options: 1. Continue the practice of excluding GO Bond-related costs and future financing costs
from the project list. 2. Adopt the other system methodology of adjusting the project list in the future to include financing costs (if not paid by property taxes) once they are known.
Attachment 2, Page 3 of 8
3. Make some estimate of future financing costs for large projects and include in the methodology now
Pro’s of including debt service costs in methodology:
• Factoring in the cost of debt service is allowable under the law.
• Building in this cost eliminates the need for the city council to revisit the SDC project list and adjust SDC rates each time a project is bonded.
• All new development pays the same rate from the beginning instead of assessing higher rates to those who develop after the debt service costs are included.
Con’s of including debt service costs in methodology:
• It is difficult to predict so far in advance what the bonding environment will be or even
if we will sell any bonds to finance any of the projects, therefore an accurate estimate is difficult to calculate.
• Using an estimated cost increases project costs and therefore the overall SDC rate. If actual debt service cost is lower or no debt is issued, then SDC collections are
inaccurate.
Issue 3: Should the use of the Institute of Transportation Engineers (ITE) data manual for trip data be continued? (impacts “Estimated number of trips”)
CAC Recommendation: Yes
Staff Recommendation: Concur
The system-wide growth in trip ends is determined from the City’s traffic model, based on
projected employment and residential development. However, the City (along with other communities) uses ITE data to then determine the estimated number of new trips for individual
developments. The CAC reviewed the following options and pro’s and con’s of each.
Options:
1. Continue the practice of using ITE data (supplemented with developer studies) to
estimate new trips for individual developments 2. Use local trip data to determine trip rates.
Pro’s of continuing current practice (Option 1):
• Consistent with industry standards and other communities.
• There is insufficient local data to determine trip rates for the full array of future development types.
• ITE is an objective, national source of data.
• Allowing developers to submit additional studies, addresses most acute problems.
Con’s of current practice (Pros of Option 2):
• The ITE trip rates for some land uses are based on small sample sizes or is based on
information developed years prior (when communities were more vehicle-centric)
Issue 4: Should there be an automatic adjustment in SDC rates that addresses inflationary changes? (impacts final “SDC” rate)
CAC Recommendation: Yes, Use the ENR-CCI 20-City index and adjust annually
Staff Recommendation: Concur
The SDC project list is based on estimated current (2013) project costs as estimated by the
adopted Transportation System Plan. The City, like most other cities, updates SDCs annually
through an administrative process based on inflation (as determined by the Engineering News Record 20-City Average Construction Cost Index). There are limits to precision with any SDC methodology – the SDCs are calculated based on estimated project costs (using best available
Attachment 2, Page 4 of 8
information) and estimated growth units (forecast trips). However, the practice of adjusting SDCs annually for inflation enhances revenue adequacy, as the SDCs are more likely to reflect
actual future project costs during times of inflation.
Most Oregon cities use one of two construction cost indices published by the Engineering News Record (ENR): 20-city average or Seattle. Other cost indices include the Consumer Price Index
(CPI) or the National Highway Construction Cost Index (NHCCI), used by the City of
Portland1.
The CAC reviewed the table below which summarizes available data from each cost index for
the past 5 years and evaluated the following options.
Annual % Change in Index
ENR-CCI NHCCI
CPI-U1 20-City Seattle2 Annual 10-Year Avg.
2009 -0.4% 3.1% -0.3% -15% NA
2010 2.1% 2.7% 0.1% -3% NA
2011 2.7% 3.4% 1.9% 1% NA
2012 2.1% 2.3% 3.4% 5% NA
2013 1.7% 2.6% 7.3% NA 10%
Total 8.9% 11.4% 12.8% 2.7%
1 Consumer Price Index for all urban consumers
2 City index uses local prices for cement and lumber, and national price for steel
Options:
1. Continue the practice of applying annual inflation/deflation administrative adjustments
2. Do not include annual administrative adjustments; instead only update SDCs when the methodology is revisited
Pro’s of continuing current practice (Option 1):
• Consistent with industry standards and other communities.
• Keeps SDCs current with general inflation trends.
• Enhances revenue adequacy, as the project list is based on 2013 costs. Without
inflationary updates, the SDC revenue will likely fall short of actual project costs at time of construction.
• Leads to incremental increases in SDCs; reducing likelihood of major increases in the future.
Con’s of current practice (Pros of Option 2):
• General inflation may not be reflective of changes in project costs.
Generally leads to annual increases in SDCs.
Issue 5: Should there be a reconciliation of actual project costs to estimated costs after project
completion to address use of any savings for future projects? (impacts “Growth Costs”)
CAC Recommendation: No, do not build into the methodology. Continue current practice of updating project list.
1 The City of Portland uses a 10-year rolling average, as opposed to annual changes.
Attachment 2, Page 5 of 8
Staff Recommendation: Concur
The SDC project list is based on estimated current (2013) project costs as estimated by the
adopted Transportation System Plan. Actual project costs will likely differ from estimates –
either on the high or low side – due to price inflation (addressed in Policy Issue #4) and other factors (changes in market conditions, project design refinements, etc.). Currently, the City does
not update the project list (or SDCs) as individual projects are completed. Adjustments to
project costs are limited to inflationary estimates (annually), and updates to the SDC methodology and project list (every 5 to 10 years). The CAC evaluated the following options
and pros and cons of each.
Options:
1. Continue the current practice of not reconciling actual and estimated project costs on a project by project basis. 2. Update the SDC project list as each project is completed.
Pro’s of continuing current practice (Option 1):
• Consistent with industry standards and other communities. The high administrative burden and potential annual fluctuations in SDCs tends to limit reconciliation of individual projects.
• Any ‘savings’ from projects are used to pay for ‘overruns’ on other projects, or new projects may be added to the adopted list.
• It is difficult to rebate previously paid SDC’s after a project is completed because SDC’s are deposited into a pooled fund. If any adjustments are made to the rates based
on lower project costs, then the rate adjustment would only impact future rate payers.
Con’s of current practice (Pros of Option 2):
• If actual project costs are consistently higher or lower than estimated costs, the SDCs will over or under collect until such time that the project list is updated.
Issue 6: Should there be a credit and/or incentives policy?(impacts “Estimated number of trips”)
CAC Recommendation: No, Do not embed an incentive within the methodology. Keep the
methodology simple. The Council can provide incentives or discounts outside of the methodology if they so choose.
Staff Recommendation: Concur
The City is required by law to provide credits for offsite development already. The CAC evaluated whether there should be additional credits beyond the statutory requirements and
whether there are other ways to use credits and incentives in the SDC structure to encourage development. For example, other communities provide incentives for mixed-use and transit-oriented development because such developments have been shown to generate fewer auto trips.
Such incentives/credits are generally provided through reductions (of 10-30 percent) to the base trip rates. The City’s current SDC code allows developers to perform individual trip generation studies that take into account these factors; however, there is currently no other mechanism for
adjusting trips (and therefore, SDCs) based on these factors.
Options:
1. Do not provide a mechanism for adjustments beyond the statutory requirements within
the methodology (current approach). 2. Include a mechanism for trip adjustments within the methodology for development that
meets specific criteria for mixed-use, density, and proximity to transit (detailed criteria
and adjustment factors to be provided at future meeting). Using objective data, City staff will determine the amount of trip reduction based on the development proposals mixed
Attachment 2, Page 6 of 8
use and transit-oriented development (TOD) characteristics in addition to the areas multimodal infrastructure and land use characteristics.
Pros of including trip adjustment in the methodology (Option 2):
• The traffic model that was developed as part of the Transportation System Plan, factors
in reduced trip rates for developments that will ultimately be in higher density/mixed use areas. Therefore, inclusion of such adjustments is theoretically ‘revenue-neutral’,
meaning that the total number of trips used to calculate the average SDC cost per trip, is
roughly the same as the actual number of trips that will be assessed to new development over the planning period.
• Provides incentives to development in areas planned for future high density, mixed use, and transit.
• Shows city commitment to the planning efforts put in place and resolve to follow thru with our commitments to developing the areas as planned
• Could help meet goals of scenario planning effort
• Could decrease need for road projects and increase funding available for alternative
projects
• Consistent with some other communities.
Cons of including trip adjustments in methodology (Pros of Option 1):
• There is currently no local data to use in determining the specific adjustments.
• Reduction in the methodology may be difficult to defend due to the wide range of
variability with different types of mixed use TODs in relation to their trip reduction
potentials.
• Increases the likelihood of appeals and subjective decisions to resolve them.
• Staff time will be needed to coordinate and perform analysis on each development to determine degree of reduction for mixed use and TOD given methodology reduction
descriptors.
• Adjustments will result in lower SDC revenue collected.
• It will take years for the lower trip rates to be fully realized, given that development will occur incrementally, such that the ultimate density and land use variety will not be
realized initially.
• Increases complexity of methodology.
Issue 7: Should Council policy allow commercial/industrial ratepayers to defer payment of SDC’s over time similar to that allowed by residential ratepayers? (Does not impact rate formula, but rather cash flow to the SDC Fund.)
CAC Recommendation: Yes, expand financing program to include commercial/industrial development. Ensure repayment through lien and charge a market interest rate. (One member does not want the city to charge interest to commercial/industrial developers.)
Staff Recommendation: Continue with city’s current practice of allowing commercial/industrial developers to make a down payment on SDC’s at application and pay the balance upon occupancy. Staff can adjust the formula for the down payment if Council desires.
Consistent with ORS 223.208 (the Bancroft Bonding Act), the City’s current SDC ordinance
allows the purchaser of a home or multifamily dwelling to finance system development charges over a period of 10 years, under certain conditions detailed in Attachment 2. The purpose of the Bancroft Bonding Act) is to provide purchasers of homes or multifamily dwellings with
Bancroft financing of system development charges as an alternative to absorbing those charges into the long-term permanent financing of their homes. [1977 c.722 §2]
No such provision is currently provided for commercial/industrial development. Some other
Attachment 2, Page 7 of 8
communities, like the City of Portland, allow financing for all development types through installment loans or a deferral contracts secured by a lien on the benefited property. Loan
requirements are consistent with City of Portland installment contract policies, including:
• All property owners of records must sign an installment contract.
• The SDC financing installment contract creates a lien on the property.
• For installment loans, applicants may select monthly payments for 5- or 10-year periods.
For amounts over $2,500, applicants may select semi-annual payments over a 20-year
period. Deferral contracts are offered for 3, 6, or 12 month periods based on the stated project value.
The CAC evaluated the following options and pros and cons of each.
Options: 1. Do not expand SDC financing program to commercial/industrial development (maintain current approach)
2. Expand SDC financing program to include commercial/industrial development Pros of expanding financing option to commercial/industrial development (Option 2):
• Allows developers to spread payments over multiple years, to reduce upfront cost
Cons of expanding financing option to commercial/industrial development
• Reduces annual revenue collected by the city
• Additional administrative time and costs for city
• Additional financing costs for developer
Issue 8: Should the appeal process be evaluated to determine if any improvements should be made? (Does not impact rate formula)
CAC Recommendation: No, the current procedure is acceptable. Staff Recommendation: Concur The City is required by law to adopt administrative review procedures by which any citizen or
other interested person may challenge an expenditure of system development charge revenues. Such procedures shall provide that such a challenge must be filed within two years of the
expenditure of the system development charge revenues. Furthermore, a local government must
advise a person who makes a written objection to the calculation of a system development charge of the right to petition for review pursuant to ORS 34.010.
Options: 1. Do not evaluate appeal process (maintain current approach)
2. Evaluate appeal process
CONCLUSION
The CAC discussed the possible range of new rates derived from the methodology update after incorporating our policy recommendations. The CAC recommends that Council strive for a
reasonable increase above current rates, such as a 10-15% increase, that will provide a fair rate to developers and also provide enough revenue for the City to be able to bring the
Transportation System Plan projects to fruition.
The CAC appreciates the opportunity to give input to Council on this methodology update.
Attachment 2, Page 8 of 8