Water and Transportation System Development Charge (SDC) Update SE Johnson Road, Suite 205, Milwaukie, OR (503) th Ave. NE, Suite D-215, Redmond, WA (425) Presented by John Ghilarducci, FCS GROUP Principal City of West Linn

2 ORS , defines a uniform framework for the imposition of SDCs, to provide equitable funding for orderly growth and development in Oregons communities SDC Background 1.SDCs are one-time charges, not ongoing rates. 2.SDCs are for capital only, in both their calculation and in their use. 3.Properties which are already developed do not pay SDCs unless they redevelop. 4.SDCs include both future and existing cost components. 5.SDCs are for general facilities, not local facilities. Key Characteristics

City of West Linn 3 SDC Components and Calculation Reimbursement Fee Eligible value of unused capacity in existing facilities Growth in system capacity demand Improvement Fee Eligible cost of planned capacity increasing facilities Growth in system capacity demand System Development Charge per unit of capacity

City of West Linn 4 required as a condition of development, identified in an adopted capital facilities plan, and is either off-site or, if on-site, is required to provide more capacity than needed by the development in question. Credits against the improvement fee must be provided for the construction of a capital improvement, which is:

City of West Linn 5 Proposed charges incorporate growth and cost assumptions of recently adopted plans: Water System Master Plan: Capital maintenance projects are assumed to benefit existing and future customers equally Transportation System Plan: Planned facilities, including bike/ped/transit, are sized to serve local and regional (thru-) traffic; all costs recovered from in-City development Proposed base scenarios do not include financing (interest) costs Transportation SDC base scenario includes separate bike/ped component, recovered by forecasted bike/ped trips Key Assumptions / Discussion Points

City of West Linn 6 Water SDC Calculation Base Scenario: Without Interest Costs

City of West Linn 7 Fee Calculations

City of West Linn 8 SDC Calculation

City of West Linn 9 Reimbursement Fee Cost Basis

City of West Linn 10 Improvement Fee Cost Basis

City of West Linn 11 Summary of Alternative Scenarios

City of West Linn 12 Residential Water SDC Comparison

City of West Linn 13 Transportation SDC Calculation Base Scenario: Without Interest Costs

City of West Linn 14 Motor Vehicle Fee Calculations

City of West Linn 15 Motor Vehicle SDC Calculation

City of West Linn 16 Bike/Ped Fee Calculations

City of West Linn 17 Bike/Ped SDC Calculation

City of West Linn 18 Reimbursement Fee Cost Basis

City of West Linn 19 Vehicle Improvement Fee Cost Basis

City of West Linn 20 Bike/Ped Improvement Fee Cost Basis

City of West Linn 21 Transportation SDC Comparison

City of West Linn 22 Sample Charge Applications

City of West Linn 23 Summary of Alternative Scenarios Separating the vehicle and non-vehicle charges allows for recovery of a greater share of bike/ped improvement costs due to alternative capacity methodology

City of West Linn 24 Full Cost Recovery Capital improvements plan projecting needs for at least 10 years Reimbursement fee component Planning and financing costs, as well as the costs of calculating the SDC and accounting for their expenditures and revenues Annual charge adjustment to account for changes in land/materials costs Recognition of Cost Variations By Location Metro Recommendation – area-specific charges recommended where cost differences may be significant; particularly relevant for growth in currently unserved areas For the City of West Linn, no need for area-specific charges as forecasted growth needs are fairly homogenous throughout the City Technical vs. Policy-Based Solutions Give preference to technically-based considerations over policy-based approaches Metro SDC Recommendations

City of West Linn 25 Metro SDC Recommendations Impact-Based SDCs Land Use – vary fees by land use (homes, apartments, grocery stores, offices, etc.) Water SDC – not readily applicable Transportation SDC – charge varies by trips for each land use Development Size – vary residential charge by lot size (related to irrigation) Water SDC – not readily applicable except as meter size indicates Transportation SDC – house size is a potential indicator of the number of occupants, which relates to trip generation – cost/benefit of administration is unclear Density – vary residential fee by units per lot (higher density, lower charge) Higher density development is less costly to serve per unit However, charge application would be significantly more complex; resulting charges would be biased in favor of urban, dense development Green Design – discounted fee for design features that reduce water usage Metro Recommendation – reduced SDC for on-site facilities that reduce demand

City of West Linn 26 Credit Policy Only grant credits for improvements on the SDC project list Credits for off-list improvements take money away from SDC project funding (the City is not made whole) Implementation: strike parts (1)(c) and (2)(b) of section Current Code: (1)(c) When a permittee seeks a credit for a capital improvement that is not a qualified public improvement the following process and standards shall be applied: (i) Prior to beginning of construction on the capital improvement the permittee and the City shall meet and establish the maximum credit that will be allowed for the improvement… (2)(b) For a request that is not related to a qualified public improvement the City Engineer shall review the documentation submitted to justify the request and determine the amount of credit due. Indexing Allow annual charge adjustment per ENR Construction Cost Index Implementation – incorporate the following into Code: The SDC reflected in this methodology shall be adjusted each year on July 1 based on the change in the Engineering News Record (ENR) Construction Cost Index (CCI) for Seattle, Washington for the most recent twelve-month period. Proposed Code Changes

City of West Linn 27 Rationale for Inclusion within SDC Cost Basis To the extent that debt financing is required to fund project costs, growths share of the prospective repayment -- including principal, interest, and issuance cost -- is captured in the SDC Pros: The SDC fully captures all costs necessary to provide system capacity for new development Greater cost recovery through the SDC reduces the impact on rates/taxes if growth (and associated SDC revenue for debt service) is lower than expected Cons: New development may again pay for financing costs when they pay debt service through ongoing utility rates or property taxes Resulting SDC revenues should committed to use for debt service Could over-collect if cash or other funding is used in place of debt Inclusion of Project Financing Costs

City of West Linn 28 Adopt $6,747 per ME water SDC and transportation SDC of $6,354 per P-HT and $1,466 per bike/ped trip Create separate account for bike/ped SDC receipts & expenditures Incorporate Metro Considerations That Apply to West Linn Water SDC Full Cost Recovery Technically-Based Approach Development Size Green Design Transportation SDC Full Cost Recovery Technically-Based Approach Land Use Type Green Design Update Municipal Code Credit Policy Annual Cost Adjustments Key Recommendations