Oregon City weighs SDC deferral and tiered scaling to lower upfront housing costs

Oregon City commissioners on Jan. 13 heard consultants and staff present options to defer system development charges (SDCs) and to scale residential SDCs so smaller homes pay a lower share of infrastructure costs.

Dana Webb, the city’s Public Works Director, introduced the consulting team from FCS, which explained SDCs are one‑time charges intended to pay a proportionate share of existing system buy‑in and growth‑related capital improvements. "System development charges... are the one‑time charges paid at the time of development, generally paid at the time of development," consultant John Guillarducci said while outlining the legal framework and allowable uses under state statute.

Consultants described common collection points — building permit, connection or certificate of occupancy — and noted many Oregon jurisdictions defer payment until certificate of occupancy to reduce developers’ upfront costs. They also warned about enforcement and administrative burdens if payment is delayed.

"So currently, in Oregon City, if you choose not to pay your SDCs at your time of building permit issuance, you can work with the finance department and do a Bancroft bonding," Webb told the commission, explaining the city’s existing option that places a lien on property, carries about a 9% interest rate and can run up to 10 years.

The consultants presented two broad scaling approaches for residential SDCs: a continuous per‑square‑foot formula and a tiered model that groups dwelling sizes (or counts bedrooms) and sets representative charges per tier. They said the methodology must be data‑driven and proportionate to expected demand: "We need to have a data based approach," Guillarducci said, pointing to American Housing Survey and Portland‑area occupancy data used to set inflection points.

Commissioners focused questions on three trade‑offs: (1) the city’s collection and cash‑flow risk if payment is delayed, (2) the administrative cost and enforcement work required to make deferrals effective, and (3) equity goals to encourage construction of smaller, more affordable units. One commissioner opposed deferral because of collection concerns: "I don't support the deferral at this point" (Speaker 6). Another commissioner urged a deferral program for all project types to give Oregon City a competitive advantage: "I am in favor of a deferral program for all" (Speaker 8).

Several commissioners expressed strong support for tiering or scaling residential SDCs to reduce disincentives for smaller homes. "I'm really enthusiastic about that," one commissioner said of tiering for parks SDCs and urged consistency across other SDC types (Speaker 6).

On water SDCs, staff recommended retaining the current meter‑size approach, which several commissioners and staff described as an industry standard that already links capacity to potential demand. Webb confirmed staff will return with more refined options: "We'll bring back some... little more refinement and options for deferral," she said, and noted sanitary, stormwater and transportation scaling approaches would be proposed with adjustments aimed at administrative consistency.

Next steps: staff will draft codified options for deferral security, timing (for example a short window before certificate of occupancy), cost‑recovery fees and tiering methods, then return the proposals for further commission direction. No ordinance or formal vote was taken at the work session.