Trying to inflate a balloon with a gaping hole in it would seem like the height of stupidity. The balloon that was the Central Oregon real estate market went ka-pow almost five years ago. But some folks in Redmond think that if they can just hook it up to an air hose, the good times will roll again.
The Redmond City Council is contemplating a proposal by John Start, manager of Redmond Economic Development, to reduce Systems Development Charges by half. SDCs are fees paid by builders and developers to help defray the costs of new roads, sewer and water mains and other public works that are made necessary by growth. SDCs in Redmond currently are $12,320 for a single-family home and $86,500 for a 10,000-square-foot commercial building. The city expects to take in $500,000 in SDCs next year. Cutting rates by 50% would, of course, reduce that to $250,000.
Hammered like everybody else by the recession, Redmond is running in the red and having to draw on its reserve funds. The city's budget document wisely cautions against "not relying on these [reserves] too strongly and 'burning' through them before the recession dissipates." A quarter-million dollars might not look like much next to a total budget of more than $31 million, but in the city's current fiscal straits, throwing any money away is almost criminally irresponsible.
And throwing money away is exactly what the city would be doing. The idea that Redmond can kick-start the real estate market by encouraging builders to put up more houses and commercial buildings is wrong by 180 degrees. The real estate market is depressed because (A) the economy, nationally and locally, is depressed and (B) there are too many unsold houses and commercial buildings already. Slashing SDCs would do nothing about A and could only aggravate B.
Advocates of the SDC reduction say it could actually increase revenues if it succeeds in encouraging more construction. That's a preposterous argument - construction would have to double for the city just to break even. The SDC cut also is supposed to be temporary - but experience on both the local and national level shows that once a tax or fee cut goes through, it's damned near politically impossible to take it away.
In the end, the money for those sewers and roads and water mains will have to come from somewhere. Cutting SDCs now would just be kicking the can down the road and hoping that somehow, someday, fees from new development will cover the cost of current infrastructure needs. That variation on the old Ponzi game has been tried before, in Bend and elsewhere, with disastrous results.
To their credit, some Redmond city councilors are skeptical about the SDC proposal. Shirlee Evans and Margie Dawson noted correctly that it would worsen the real estate glut and be unfair to Redmond citizens who own properties that they're trying to sell.
Here's hoping all the councilors will adopt the same skeptical point of view and give this misguided proposal THE BOOT that it richly deserves.