If they know what system development charges are at all, most Bend residents probably believe the fees are supposed to cover the infrastructure-related costs of new development. You know, the street SDC collected from a new home is connected to the car trips it will generate. The sewer SDC is connected to the volume of stuff that will go down the drain, and so on. SDCs are commonly known as impact fees for a reason: They’re expected to be tied to actual impacts.
That’s the idea, anyway. But policies designed to do one thing can, through aggressive manipulation and rationalization, end up doing something else entirely. Such mission creep may soon corrupt Bend’s SDCs, thanks to a well-meaning effort to increase the supply of housing within reach of middle-income people. If housing advocates have their way, the city’s impact fees will come to look more like luxury taxes.
Bend collects SDCs for streets and for sewer and water systems, and the revenue must be devoted to capital improvements (Bend’s independent park district collects an SDC as well). The process by which rates are set and money allocated is governed by a legal framework whose purpose is to “provide equitable funding for orderly growth and development.” Determining a new house’s equitable share of road, sewer and water funding is, as you might imagine, quite complex. The effort is also imperfect, as the actual impacts of identical houses can vary widely depending upon how often their residents flush their toilets, water their lawns and drive their cars. But Bend and other cities generally make a good faith effort to apportion costs equitably.
Enter the Bend Collaborative Housing Workgroup, a collection of industry professionals, interest-group representatives and others who, with guidance and support from Bend 2030, developed a list of policy recommendations to boost the supply of so-called “middle market” housing. On Aug. 9, the city’s Affordable Housing Advisory Committee considered the group’s recommendations and decided to explore a handful of them, including one that would change the way the city assesses SDCs.
Bend, the work group decided, should create tiered SDCs based on lot size, square footage or the number of a house’s bedrooms. The city generally treats all single-family homes the same, and this makes sense. A home’s square footage, for instance, is a flawed predictor of actual impact on infrastructure. Four people living in a 1,600-square-foot house with three bedrooms can have a much larger impact on roads and sewers than two people living in a 2,500-square-foot house with four bedrooms. Yet under the housing work group’s proposal, the small, crowded house would be treated as if it had a reduced system impact.
This makes no sense at all unless the tiered SDC proposal has nothing whatsoever to do with a house’s impact on the infrastructure SDCs were designed to support. That’s exactly what’s going on here, as the work group freely acknowledges. The purpose, according to its report, is to create “a new incentive to build smaller, more land use efficient homes.” Under this scenario, SDCs would function as luxury taxes, which would be an interesting twist on a supposedly equitable system.
It’s true that the city already slashes SDCs for affordable housing projects in order to make them easier to finance. In doing so, it has created a useful precedent for those who believe impact fees should be manipulated to encourage other types of “good” development, including certain kinds of market-rate housing. At some point, policymakers need to say “enough,” and the best time to do so is before SDC mission creep gains momentum. Before you know it, interest groups will be petitioning councilors to waive transportation SDCs for homes without garages and water SDCs for houses without thirsty lawns.
Believe it or not, Bend would not be breaking new ground by tiering SDCs. One city that has is, you guessed it, Portland, which adopted a park SDC methodology in 2015 that tiers fees according to a home’s square footage. Developers, Realtors and other businesses promptly challenged the methodology, including its tiered component, in court. The litigation has not yet been resolved.
Before Bend City Council seriously considers pulling a Portland, its members ought to think about how they’re going to sell tiered SDCs to their constituents. It may be possible, and legal, to close one eye, squint and argue that tiered SDCs really, truly, honestly are justified by varying impacts. Still, the effort would be nothing more than a back-door justification for a policy shift designed to do something unrelated. City Council will have a hard time convincing Bend residents that it operates in good faith after a stunt like that.
Besides, there’s a more simple and equitable way to lower SDCs for smaller homes, if City Council really believes that’s necessary: Cut them equally for all homes.
— Erik Lukens is editor of The Bulletin.