The Corvallis City Council has adopted legislation establishing system development charges (SDCs) for water, sewer, drainage (stormwater), streets, and parks services.  SDCs are updated annually to account for inflation and changes to the SDC project lists.

Background:

The City of Corvallis has had SDCs in place since 1973. As part of this most recent update, the City evaluated the basis for its SDCs and tested the adequacy and equity of the existing fee structures. The program review used the consultant team’s experience, as well as the experience of other Oregon cities, to bring the City’s charge structure up-to-date, and ensure that the new charges are both fair and legally defensible. The cost basis of the charges were also updated to ensure sufficient cost recovery within the guidance of Oregon State law.

What is a System Development Charge?

A system development charge (SDC) is a one-time fee imposed on new or some types of re-development at the time of development. The fee is intended to recover a fair share of the costs of existing and planned facilities that provide capacity to serve new growth.

Oregon Revised Statute (ORS) 223.297 - 223.314 defines SDCs and specifies how they shall be calculated, applied, and accounted for by local government. By statute, an SDC is the sum of two components:
  • a reimbursement fee, designed to recover costs associated with capital improvements already constructed or under construction, and
  • an improvement fee, designed to recover costs associated with capital improvements to be constructed in the future. 
SDCs are intended to recover the extra capacity cost of public infrastructure.  Reimbursement and improvement fee calculations do not include the cost of a "local equivalent" facility.  For example, Streets SDC fees are only designed to recover the additional cost to construct collector and arterial streets, above that required to construct local streets.

SDC Calculation:

In general, an SDC is calculated by adding the reimbursement fee component to the improvement fee component. A sample calculation is shown below.

 

Reimbursement Fee   Improvement Fee   SDC
 Eligible cost
of capacity in
existing facilities
+ Eligible cost of planned
capacity-increasing capital
improvements
= SDC
($ / unit)

Because of the infrastructure needs facing the City of Corvallis and the lack of significant "unused capacity" in the existing system, the improvement fee is far greater than the reimbursement fee.

SDC Methodology:

The City considered several approaches to determine the "capacity-increasing" methodology of planned projects for inclusion in the improvement fee cost basis. The City Council settled on a methodology that has various features and applications and some examples are included below to help understand the approach.

For new projects that are solely needed for future growth, SDC revenue pays the full cost of those projects. Examples include traffic signals, and water or wastewater treatment plant expansion.

For new projects that provide both basic service levels and extra-capacity, the cost of those projects are divided between SDC revenue and payment by benefited properties. An example includes the extension of a new collector street. The basic two-way street pavement, sidewalks and drainage costs are paid by benefited properties. The extra capacity costs of traffic signals, vehicle turn lanes or bicycle lanes are paid by SDC revenues.

For reconstruction projects that are initiated to accommodate new growth, the cost of those projects are paid by SDC revenue less the age or condition value of those facilities, and less the costs of existing deficiencies and a share of any new regulatory requirements. An example is the replacement of a sewage pump station to increase pumping capacity. SDC revenues would pay the full project cost less the "wear and tear" value on the existing facilities as well as a share of any new regulatory components added that system users would be expected to pay for replacing the existing pumps and facilities at the time of reconstruction.

City staff and the consultants evaluated all planned projects to isolate the "capacity-increasing" element. The transportation and utility master plans and SDC project lists are maintained by the Engineering Division of Public Works Department.

As shown below for the Kings Boulevard arterial street reconstruction improvements, the costs of capacity-increasing project elements were included in the SDC improvement fee cost basis instead of the full project cost.

Example Determination of SDC-Eligible Costs
Project Description Amount
Kings Boulevard Improvements Total Project Cost $1,610,000
Less: Anticipated Grants (216,000)
Less: Existing Street Rehabilitation (405,200)
Less: Bicycle Deficiencies
(no on-street bike lanes)
(269,400)
Less: Aged Sidewalk, Curb, Gutter Discount + (186,300)
SDC-Eligible Cost = $533,100

 

The City took this approach for water, wastewater and transportation services, deducting both the amount of other funding sources and the cost of providing a basic service levels from the total project cost. In addition, the cost of correcting any existing system deficiencies was explicitly removed from the SDC cost basis for each project.

Why Have SDCs Changed?

The Taylor Water Treatment, Water Distribution, Wastewater, Transportation, and Parks master plans have all been updated through public involvement processes since the 1991 SDC review. These formal actions by the Planning Commission and City Council have added key projects to the SDC lists. Other factors are listed below.
  • The existing and separate water treatment plant expansion charge (WTPEC) is now incorporated into the water SDC as a reimbursement fee.
  • The future wastewater and water treatment plant expansions that are needed to serve new growth are now included in the SDC -- not to be funded by a separate development fee as before.
  • The Institute of Transportation Engineers (ITE) trip manual is now used to estimate daily trips and transportation system impact for a variety of development types.
  • Alternate transportation mode projects including bicycle lanes and pathways needed to serve new growth are now included in the project list.
  • The City-share of capacity-increasing State highway projects is now included in the project list which is intended to promote a partnership with ODOT for future highway system capacity needs.
  • In addition to new park projects identified in the Parks Facility Plan, all SDC-eligible parks costs are now included in the charge basis.
  • An SDC planning horizon of 80,000 population was adopted for better determining and cost estimating future capital investment. The previous planning horizon was for 120,000 population, which produced lower SDC rates. 

SDC Fee Calculator:

Clicking on the "SDC Fee Calculator" link below will give you the opportunity to download a Microsoft Excel spreadsheet, from which you can generate a customized SDC fee estimate by entering in project data.  You must have Excel available on your computer to able able to use the fee calculator.  Once the spreadsheet is open, please follow the instructions on the "Directions" tab.  Please contact Development Services (541-766-6929) if you have questions about, or issues with, the fee calculator.

Use the SDC Fee Calculator

 

Contact for More Information:

SDC charges are determined by the Development Services Division during the plan review process, and are due at the time of permit issuance.  Questions regarding SDC's and how they are applied to a specific site or construction project should be directed to the Development Services Division at 541-766-6929.  General questions regarding the SDC program should be directed to Public Works at 541-766-6916.

Key Facts About SDCs:

  • SDCs are one-time charges, not ongoing rates or taxes.
  • SDCs are used to fund additional capacity needed to serve growth.
  • SDCs do not fund ongoing system maintenance.
  • SDCs include future and existing cost components.
  • SDCs are intended to recover a fair share of the cost of existing and planned facilities needed to serve new growth. 

Additional Background Information about SDCs:

 

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Last updated: 4/26/2017 9:38:12 AM