System Development Charges – For Better or Worse

By Don MacGillivray


Livability is important when businesses decide to locate or relocate. System Development Charges (SDC’s) help maintain Portland’s quality of life as city infrastructure grows.

Most people have heard of System Development Charges or Impact Fees, but few know what they are and how they work. If a developer or contractor is applying for a building permit in the City of Portland, SDCs usually apply to the project. New developments create increased pressure on infrastructure so SDCs are critical to maintaining city services for new and current residents and businesses.

SDCs are one-time fees charged to new development to help pay for the costs associated with the building of the public facilities needed for the additional users of our city. They apply to both new commercial and residential construction projects.

Charges for storm-water drains and sanitary sewers, parks and recreation facilities, domestic water usage, new roads, street improvements, and new or expanded school facilities are included. As SDCs are collected, they are often set aside for specific types of projects.

SDC money can be spent only on capital improvements that increase the capacity of the infrastructure and offset the impact of new development. They may not be used for routine operational and maintenance costs.

While charges can vary greatly depending on the size of the development, the charges for a standard new home would generally be about $22,000. The Bureau of Environmental Services would charge about $5,600, the Portland Department of Transportation $2,800, the Water Bureau from $2,000 to $5,500 depending on size, and Parks and Recreation $8,600. A $2,000 charge would go to the School District.

The SDC Exemption Program assists developers by reducing their development costs when building affordable residential housing administered by the Housing Bureau of Portland.  Accessory Dwelling Units (ADU’s) will also be exempt until July 31, 2016.

Impact fees are an accepted form of financing in many communities in the country, but also controversial in many locations.

SDCs are one of the most significant costs to new development. It is voiced that impact fees hurt the local economy,  reduce the jobs the an area, and act like a tax that slows growth and development. The fees increase the price of housing, especially new construction, where developers pass the SDCs on to the future homeowners.

Representatives of the Portland Business Alliance, Building Owners and Managers Association, Home Builders Association, Small Business Advisory Council and Commercial Real Estate Economic Coalition often express their lack of enthusiasm for SDCs.

Impact Fees or System Development Charges have become a generally-accepted fact of life. The city must keep pace with its growth and there are no better ways that have been found to pay for it.

System Development Charges – For Better or Worse

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