Item 3G: Resolution adopting SDC Inflationary Adjustments

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adjustments to SDCs to further account for changes in construction and land costs. Periodic adjustments allow SDCs to more closely reflect current costs of providing system capacity to new development. The proposed rate adjustment to the local wastewater, stormwater and transportation SDCs is based on a single adopted cost index, the 20-city national average construction cost index (CCI) as published by the Engineering News-Record (ENR). The ENR CCI reflects an increase in average construction costs of 6.8% for the prior 24-month period as reported in December, 2009. The proposed adjustment to the parks SDC is based on two adopted cost indices: 1) as with other local systems, the ENR CCI is used to adjust park development costs; and 2) the Lane County Assessment & Taxation Office’s (LCA&T) published Sales Ratio Report is used to adjust park land acquisition costs. Application of the published 2008, and 2009, Sales Ratio Reports reflects a 28.6% increase in average costs of vacant residential and recreational land over a 24-month adjustment period, in this case calendar years 2007, and 2008, since a published Sales Ratio Report reflects the previous calendar year’s data. The combined effect of applying these two indices to the parks SDC is that rates for residential development types increase by approximately 22.5% while rates for nonresidential development types increase on average by 29.4%. The difference in parks SDC rate adjustments between residential and nonresidential categories is related to the different effect of the inflationary adjustments on the park bond debt service SDC credit calculation versus the gross SDC calculation. This is a result of how construction and land costs impact the various projects in the adopted Parks, Recreation & Open Space (PROS) Project and Priority Plan; the SDC rate is based on a different mix of construction and land acquisition project costs than the mix of these project costs anticipated to rely on property tax or bond funding which form the basis of the SDC credit. Due to these differences, the gross SDC per unit increases more than the credit. Because the nonresidential SDC has a higher credit against the gross SDC per unit to begin with, it results in the net SDC increasing more for nonresidential than residential development types. The proposed rate adjustments across all four local systems translate to an approximate 12.3% increase in total gross SDCs for a typical new single-family residence, from a current total of $7,977 to a proposed total of $8,961. Other development types would experience similar proportionate increases in total SDCs, typically ranging from approximately 5% to 12% over current totals. Council Goals/Action Priorities This agenda item relates to one of the council’s current goals, the Transportation Initiative, in that a portion of transportation SDC revenues are dedicated to preservation and rehabilitation of the existing system. Timing Local SDC rates were last updated in April 2008, reflecting ENR CCI adjustments through December 2007, and LCA&T Sales Ratio data through December 2006. The proposed adjustments to rates based on the ENR CCI through December 2009, and LCA&T Sales Ratio data through December 2008, provides for timely updates of rates. While the Eugene Code and Oregon SDC statutes do not require notice of adoption by resolution of inflationary adjustments based on a cost index, a notice has been provided as a courtesy to interested persons. The notice was published in the Register Guard on December 26, 2009, and posted, along with the draft resolution and exhibit, at Eugene City Hall and the Z:\CMO\2010 Council Agendas\M100111\S1001113G.doc