City Adopts Overhaul of Infrastructure Charges Despite Medical Sector Concerns
The City of Bend has formally adopted new methodology for calculating System Development Charges (SDC’s) — fees required for new development to help offset infrastructure costs — despite concerns of a disproportionate impact on commercial projects.
System Development Charges (SDCs) are fees paid when new development occurs, for the cost of infrastructure project lists needed to serve growth. The City of Bend says SDCs pay for crucial infrastructure that is “the backbone of the community:” transportation, water and sewer systems.
The existing SDC formula, or methodology, which sets the charges for a particular development was designed more than a decade ago, when the City’s population was well under 100,000, and requires updating on a regular basis.
The changes will lower fees for some while increasing fees for others, based on factors such as building size and type.
City leaders say the fees needed to be evaluated for “synergy” with current City Council goals and other local priorities. The City proposed updates to the formula for these fees to “enhance transparency, recover growth costs and align with Council priorities, such as housing production, housing affordability and complete communities.”
The modifications were adopted in a series of motions and unanimous votes at the May 1 City of Bend Council meeting and are set to take effect July 1 this year.
Under the revised methodologies, water, sewer and transportation SDCs for most residential developments are tiered by square footage for single-unit and middle housing, with higher square footage dwelling units assessed a higher SDC than lower square footage dwelling units.
Fees are currently the same across the board at $21,760. The update would create a tiered system, charging people with smaller homes lower rates and those with larger homes higher rates.
With the new code, a house between 600 and 1,200 square feet would incur $16,139 in SDCs. For a home larger than 3,000 square feet, the charges would increase to $31,080.
Public comment included support for a tiered approach in the residential realm, while there was concern regarding projects’ feasibility in the non-residential sector, given relatively significant increases, and requests for phasing in of the higher rates.
The meeting allowed for a final round of public comment — including some advocating for the City to consider exemptions for medical facilities, which are among commercial sectors most impacted by the proposed changes.
The Bend Chamber of Commerce, the Central Oregon Association of Realtors and the Central Oregon Business Association had previously penned a letter with more than 60 signatures expressing support for some aspects of the proposed changes and strong opposition to others.
In particular, the organizations were “highly concerned by the potential impact of such a significant increase to commercial SDCs.”
In February, Bend City Council held a work session to summarize public comments received and review recommended adjustments to the methodologies, project lists and fee schedule, as part of a series of stakeholder meetings held over two years.
Council provided guidance to phase-in SDC rates over a three-year period for non-residential uses that would experience notable fee increases under the proposed methodology.
Architect Kathy Austin, representing the Affordable Housing Advisory Committee, said, “The general public probably didn’t know that the SDC has been the same for a 1,200-square-foot home as one of 4,000 square feet, while now the fee for the smaller home will be about half as much, which is much more equitable.”
But a medical practitioner expressed major concerns about long-term impacts on the medical community, which she said cannot pass along higher fees in its reimbursement rates, while also facing increased operating costs. She said that might prevent much-needed projects from materializing and so make it “harder and harder to find good access to care.”
She said, “The medical community cannot pass these fees on. These SDCs will have a significant impact,” calling the two- or three-year phase-in a “non-solution” to the problems.
“In two or three years, our Medicare reimbursement rates will be down another five and ten percent, and the cost of living and the cost of staffing will have increased again. Please treat the medical community differently as you apply these fees.”
Among the many adjustments hashed out in protracted discussions with the business sector is a medical overlay district which would see reduced fees for medical offices near the main hospital of St Charles in Bend. To ease the initial burden, the City is planning a two- or three-year phase-in of transportation SDCs for those who’d see the biggest hikes, of at least 20%,
The current system calculates fees for commercial buildings based on where they fall in 60 dissimilar categories, determined by the usage. The revised methodology will lower the number of categories, simplifying how fees are calculated.
Prominent local developer Kevin Spencer, a Bend resident for 35 years, said it would be fairer to base fees on a project’s actual impact on City infrastructure rather than on square footage.
Councilor Megan Perkins suggested a one-year pause before starting a three-year phase-in of higher SDCs for medical and dental projects, which the council sanctioned.
The updates would give affordable housing developments a complete exemption from water, sewer and transportation SDCs. They would also encourage denser, less car-dependent buildings by offering a 30 percent lower transportation SDC for these types of properties in the core part of the City.
“There is a different methodology for residential versus commercial fee calculation. There is recognition we are in a housing crisis, so I think the City has tailored residential SDC’s quite well to stimulate further home building,” Morgan Greenwood, vice president of Government Affairs for the Central Oregon Builders Association (COBA), commented. “But some of the commercial sectors are disparately impacted, and in some cases medical development would see a 230 percent increase. The Bend medical community has given a comprehensive coordinated response, and the City has taken a second look to see how costs may be offset or concessions considered.
“I think we are underbuilt in many areas, especially in commercial and medical to support the population, and to make that commercial development even more expensive undermines the goals of creating a thriving community.”
Councilors also voted unanimously to hold the first reading and accept a Citizen Committee recommendation for higher pay — $30,000 a year for councilors, $50,000 for the mayor — after the next round of elections. A second reading and final vote will occur by the end of the month.
Councilor Ariel Mendez said that if they aimed for a more representative council, with a more diverse background, the higher pay could make the difference in more people being able to run for office.
Councilor Megan Norris pointed to health care, as an example of higher costs, which is a comparable situation with childcare.
Councilor Mike Riley cited the “key goal” of “supporting a wider diversity of community members to serve, especially working parents.
