Real Estate Industry Partners to Combat Unfair Fee
On May 27, 2015, the Portland City Council voted 3-2 in support of a massive fee hike targeted for the city’s parks and recreation program. The new System Development Charges (SDCs) would significantly impact residential and commercial development – adding thousands of dollars in fees to even a modest 1,800 sq. ft. house and doubling and, in some instances, quadrupling park-related fees on businesses.
HOW DO THE FEES WORK?
Parks SDCs are one-time fees assessed on new development to cover a portion of the costs of providing the additional parks and recreation facilities needed to respond to population growth and new development. In addition to parks, under Oregon law (ORS Ch. 34), cities can assess other SDCs against new construction as well: storm, sanitary sewer, traffic impact, water, etc.
Portland Parks changed its methodology this year for calculating these fees and the changes are due to take effect Jul. 1, 2016. The exact methodology of how the fees are calculated is very complex. Suffice it to say, we believe it is contrary to Oregon law, does not equitably apply the fees to all users, and raises housing costs in an already expensive market where affordability is a deterrent to homeownership.
WHY DO WE OPPOSE IT?
To be clear, we support parks and we want them to be thriving places in our community. Parks add to the livability of a neighborhood and we agree they need to be sustainably funded. But funding needs to be equitable to all the parks’ users, not negatively impact affordable housing, and comply with Oregon law.
Must be Legal:
- The new methodology is out of compliance with state laws that govern how SDCs are assessed. In fact, the methodology has never been used in our State before.
- There are significant shortcomings in the current parks system acknowledged by the Parks Bureau, but the new methodology concludes there are no such deficiencies.
- Funds generated through the improvement fee must be connected with specific capital projects that have been explained to the public as Oregon law requires.
- This is another example of the City trying to create a slush fund to pay for pet projects with no oversight.
Must be Fair:
- The financial burden of the new methodology is on new residents although existing residents may benefit equally or more from some of the proposed parks system plans.
- The proposal significantly and purposefully underestimates the amount of funds that will be generated by cutting regional population growth projections in half, putting even a greater burden on new residents and businesses.
- In areas where the City wants to promote small neighborhood businesses, commercial SDC rates will climb as much as 400%.
Must Protect Affordable Housing:
- This new fee assessment methodology will hurt potential buyers with passed through development fees resulting in higher housing prices in a market that is already overpriced for far too many individuals and families.
- Portland’s rentals are the fifth fastest growing in the nation and home ownership opportunities are extremely limited for households earning less than $70,000/year.
WHAT ARE WE DOING ABOUT IT?
A broad base of groups* representing members associated with the real estate industry has invested resources toward this effort. To begin, we hired Portland law firm Tonkon Torp, LLP to represent us in legal action against the City. Specifically, we filed a Petition for Writ of Review on July 24, 2015 in Multnomah County Circuit Court to start the process. A Writ of Review is the only method by which SDCs may be challenged under Oregon law. The City will have a chance to respond and then the court will schedule a hearing to address the issues raised, most likely in fall 2015. The Writ of Review petition, if successful, would allow the court to strike down the City’s ordinance adopting the amended SDCs and prevent the City from applying the flawed methodology to the other SDCs it assesses on construction.
WHY SHOULD YOU CARE?
If you work in the Portland market, it’s obvious this will directly impact your business. But even if you live in another area of the state, you should appreciate that this effort helps set a precedent that shows other communities that this kind of approach to funds generation just won’t fly.
WHAT IF YOU GET ASKED ABOUT THIS?
Please direct all media inquiries to:
Governmental Affairs Director
Portland Metropolitan Association of REALTORS®
Building Owner Manager Association
Commercial Association of Brokers
Home Builders Association of Metro Portland
NAIOP (Commercial Real Estate Development Association) – Oregon Chapter
Oregon Association of REALTORS®
Portland Business Alliance
Portland Metropolitan Association of REALTORS®