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SDC Deferral Isn't a Handout

I'm writing in response to the recent 'Boot' we received for the 'welfare for builders' proposal, as you describe it. You raise some legitimate concerns,


I'm writing in response to the recent 'Boot' we received for the 'welfare for builders' proposal, as you describe it. You raise some legitimate concerns, which I will attempt to address below. There also exists in your piece some misrepresentations, which I would like to set straight first.

Some basic facts:

1- This is not a move specific to 'builders', or COBA, or any special interest group: in the interest of equity, it must be, and is, available to all those who apply for a building permit and pay systems development charges (SDCs) in the process, the amount of which is around $15K for a single-family detached home.

2- The proposal as written would defer SDC payments for 9 months, in recognition of a typical building season. Twelve percent interest is due at the 10th month or at final occupancy, whichever comes first.

3- This 'final occupancy' refers to the date of final inspection, not the date the home sells, and not the date it is occupied. This is a crucial point. So the time frame for SDC collection is not at all related to the sale of the home, as your editorial mistakenly claims.

4- The stimulus package has a sunset of one year, at which point its efficacy will be reviewed. If it's not working, it disappears.

The key question is: how many applicants will take advantage of the nine-month deferral? Our Finance Dept. studied other cities with a deferment option: in Portland, it's 22%, in Hillsboro 6%. If we have 22% choosing the deferment option, then that's $1.1 million in deferred receipt of SDCs, $450K of which is toward sewer and water. However, if the number of people that uses the option climbs to 50 or 60%, then we have a larger problem in the shrinking SDC till (some of which we have to have available as reimbursements to commercial developers, who may ironically be bitten on the flip side).

So what's the benefit to the community? In a word: flexibility. The decreased carrying costs and better financing packages to development are significant. Don't take 'development' to be a bad word here. A local owner of a nursing home/long term care facility, for instance, states that in their case the difference of nine months is approximately $150K in finance carrying costs. That's a lot. Also, that's interim financing they wouldn't have to find or fund. With the savings, they could build two more units of assisted living. Is this a bad thing? Of course not. And it's just one example of many. Note also that we expect commercial applicants to use it more than residential ones, so the benefit is broad.

This is not to infer the stimulus package is perfect. Far from it. I worry that its passage may motivate those who are already in over their heads to further deny the stark reality of the current market. I know that building for the sake of building, while keeping trades at work in the short term, only contributes to the housing glut down the road. I don't believe that more empty homes reduce the cost of housing. I know that there's not a whole lot government can do, or should do, toward fixing bad private investment.

So there are legitimate questions. As with all votes, there's a chance our thinking here may ultimately prove misguided, and I'm glad we have the ability to scrap it in a year. But I for one am willing to try to assist the local economy through this stimulus package.

Peter Gramlich, Bend

Editor's Note: The author is a member of the Bend City Council.

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