Mounting SDC burden will stretch only so far

Oregon has pioneered an array of governmental and environmental approaches envied by, and frequently adopted by, other states across the country.

It was the first to claim public ownership of its beaches, charge deposits on canned and bottled beverages, grant voters initiative and referendum rights, conduct its elections entirely by mail, enact a state gas tax to defray road construction costs and embrace comprehensive land use planning.

Oregon was also a pioneer, and remains a national leader, on a lesser-known front - assessment of system development charges (SDCs) on new construction as a means of helping pay for infrastructure needs driven by population growth. And we have come to harbor some growing concerns about that.

Several centuries before Christ, the Greek slave Aesop concluded, in his enduring collection of fables, that too much of a good thing can turn into a bad thing. English playwright William Shakespeare took the same view in his 1599 comedy “As You Like It,” and has been widely echoed by others over the ensuing centuries.

The immediate impetus for us comes from a comprehensive analysis that has found strong agreement throughout the development industry. Those concerns are spreading through the community as people come to understand how much they ultimately will pay, directly or indirectly, for added fees to residential, commercial and industrial property developments.

In McMinnville, the analysis suggests, city adoption of a proposed 322 percent increase in its parks SDC could scuttle contemplated residential development projects and may undercut efforts to alleviate a state-imposed “severely rent-burdened” declaration.

Granted, our city’s total SDC assessment for park, street and sewer infrastructure currently adds less than $9,000 to the cost of a new home, compared to more than $25,000 in Newberg and more than $36,000 in Wilsonville, Beaverton, Hillsboro and Lake Oswego. And its impact on multi-housing is proportionately lighter as well.

However, warnings say:

The new SDC would send the parks SDC soaring from its current $2,964 per unit to $12,500 per unit on multi-family housing projects, which could threaten housing developments.

Financing is more tenuous for affordable housing than any other type of residential construction, so it’s typically the first to reach the go or no-go tipping point. And if a project fails to proceed, the city’s SDC take will be zero for park, street and sewer all three.

The cost gets passed along, and that translates to more than $100 a month or $1,200 a year to the renter. The homeowner gets to finance his payment over 30 years through his mortgage, and enjoy a free ride from there on, but the extra bite never goes away for renters.

Higher SDC costs can better be absorbed in cities like Wilsonville and Lake Oswego because their average income is vastly higher. It’s a bigger burden in McMinnville, especially for renters, who make up a substantial portion of the workforce.

Commercial and industrial projects also make a major contribution to growing local infrastructure needs, but the city isn’t proposing to assess them a proportionate share when it comes to addressing park needs. Maybe it should.

What’s more, the new parks SDC hike represents just one element of several that are currently in play, or will be before long. Consider:

The city is in the early stages of considering a hike in its sewer SDC designed to raise up to $300 million, more than three times the projected parks take of $90 million. Even if the city ends up trimming that number significantly, it figures to require increases a whole order of magnitude larger than the parks increase.

The city’s Water & Light utility arm is eyeing a new water SDC, something we currently get by without. Meanwhile, the city is looking to create a separate stormwater runoff system, proposed for funding through monthly Water & Light bills.

This whole arena is enormously complex, as any detailed analysis can demonstrate. McMinnville city officials will be inundated with reams of charts, graphics and text when time comes to make SCD decisions. While we feel woefully unprepared to make hard and fast recommendations, particularly at this relatively early juncture, we can say this:

The city needs to carefully consider the big picture as it wrestles with SDCs, utility bill add-ons and other forms of financing for its long-range infrastructure demands.

SDC charges don’t represent an endless pot of gold just waiting for the taking at the end of the rainbow.

They may seem on the surface like a painless way to lay the burden for new infrastructure on newcomers, but looks can be deceiving. SDCs feature lots of ramifications, many capable of turning sharply negative if we get carried away.

Remember Aesop’s “The Tortoise and the Hare” fable? Well, 25 centuries later, slow and steady still wins the race.

Let’s keep that in mind as we wrestle with these challenges.