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Developer seeks an installment plan for SDC payments Real estate -- Dundee council petitioned for payment terms by West End developers David Sale April 14, 2009 Developers of the West End commercial building are hoping to pay off their system development charges in installments following a request made at the April 7 meeting of the Dundee City Council. "As developers, we've gone out on a limb," said Kendall Bergstrom, the real estate agent and winemaker who led the development of the property at Highway 99W and Niedermeyer Road. "We had tons of (tenant) interest eight months ago, but those days are gone - and the recent SDC fees really caught us off guard." The city has assessed a system development charge (SDC) of $41,633 to fund sewer system improvements - a figure higher than developers previously anticipated. "Originally, the West End Building was constructed with the intent of having professional offices or other similar uses," Dundee City Administrator Rob Daykin wrote. "The sewer system SDCs for the ... real estate office, title company office and bank were offset by the credit of the prior uses (two residences) on the property." Rather than add more office space as initially planned, property owners have sought zoning approval to develop a 20-room hotel on an adjoining lot. "This increased the number of plumbing fixture units significantly, resulting in a sewer system SDC fee much higher than anticipated," Daykin wrote. "These fees, and the other necessary permits, are over 10 percent of our budget," Bergstrom said. "Being able to pay in installments would be a good option for the city, to encourage other new development if interest arises." The city of Dundee has no policy on the books allowing SDCs to be paid in installments, and normally collects the lump sum prior to issuing occupancy permits, Daykin said. The city of Newberg also requires advance payment of SDC charges, Planning Director Barton Brierley said. However, nearby Oregon cities - such as West Linn - have enacted SDC payment plans successfully. One method is to enact an ordinance allowing the city to craft finance agreements with property owners in which the city places a lien on the property as collateral, and collects the SDC charge (plus interest at a rate set by the council) in specified installments. Another way is to use the provisions of the Bancroft Act, a state law that allows SDC charges to be treated in the same manner as local improvement district (LID) assessments - that is, to be funded by issuing debt through a commercial bank in order to pay for the necessary infrastructure, then recouping the cost from the property owners. Again, the city would place a lien on the property and collect the full SDC amount plus interest under such a plan. "In this scenario the city would be able to use the debt proceeds immediately, as if the original SDC assessment was paid in full," Daykin said. The council was receptive of the proposal, but the consensus was to limit such a program to commercial, industrial and multifamily residential (apartment) buildings. "They have big up-front expenses but don't have the cash flow until occupancy," city planner Dave Monson said. "We also want to set a cutoff amount to qualify, that's well above the normal SDC cost for a single-family home," Daykin said. "Otherwise we'll have everyone lining up and that's too big of an administrative burden to handle." The council will discuss terms for an ordinance setting up an SDC payment policy at a future meeting.

Developer seeks an installment plan for SDC payments

Real estate -- Dundee council petitioned for payment terms by West End developers

David Sale

April 14, 2009

Developers of the West End commercial building are hoping to pay off their system development charges in installments following a request made at the April 7 meeting of the Dundee City Council.

"As developers, we've gone out on a limb," said Kendall Bergstrom, the real estate agent and winemaker who led the development of the property at Highway 99W and Niedermeyer Road. "We had tons of (tenant) interest eight months ago, but those days are gone - and the recent SDC fees really caught us off guard."

The city has assessed a system development charge (SDC) of $41,633 to fund sewer system improvements - a figure higher than developers previously anticipated.

"Originally, the West End Building was constructed with the intent of having professional offices or other similar uses," Dundee City Administrator Rob Daykin wrote. "The sewer system SDCs for the ... real estate office, title company office and bank were offset by the credit of the prior uses (two residences) on the property."

Rather than add more office space as initially planned, property owners have sought zoning approval to develop a 20-room hotel on an adjoining lot.

"This increased the number of plumbing fixture units significantly, resulting in a sewer system SDC fee much higher than anticipated," Daykin wrote.

"These fees, and the other necessary permits, are over 10 percent of our budget," Bergstrom said. "Being able to pay in installments would be a good option for the city, to encourage other new development if interest arises."

The city of Dundee has no policy on the books allowing SDCs to be paid in installments, and normally collects the lump sum prior to issuing occupancy permits, Daykin said. The city of Newberg also requires advance payment of SDC charges, Planning Director Barton Brierley said.

However, nearby Oregon cities - such as West Linn - have enacted SDC payment plans successfully.

One method is to enact an ordinance allowing the city to craft finance agreements with property owners in which the city places a lien on the property as collateral, and collects the SDC charge (plus interest at a rate set by the council) in specified installments.

Another way is to use the provisions of the Bancroft Act, a state law that allows SDC charges to be treated in the same manner as local improvement district (LID) assessments - that is, to be funded by issuing debt through a commercial bank in order to pay for the necessary infrastructure, then recouping the cost from the property owners. Again, the city would place a lien on the property and collect the full SDC amount plus interest under such a plan.

"In this scenario the city would be able to use the debt proceeds immediately, as if the original SDC assessment was paid in full," Daykin said.

The council was receptive of the proposal, but the consensus was to limit such a program to commercial, industrial and multifamily residential (apartment) buildings. "They have big up-front expenses but don't have the cash flow until occupancy," city planner Dave Monson said.

"We also want to set a cutoff amount to qualify, that's well above the normal SDC cost for a single-family home," Daykin said. "Otherwise we'll have everyone lining up and that's too big of an administrative burden to handle."

The council will discuss terms for an ordinance setting up an SDC payment policy at a future meeting.