System Development Charges Rise Next July

The Toledo City Council voted Dec. 1 to increase System Development Charges (SDC) to build a budget for future infrastructure spending. SDCs are one-time charges by municipalities on certain new construction to pay for new infrastructure capacity. They are widely used to help communities expand water, wastewater, transportation, storm water and park services without charging existing customers. SDCs are only triggered for new construction, some commercial renovation, if the new use would affect system capacity, or in instances where a homeowner turns a single family unit into a duplex or fourplex.

Staff will present resolutions to be voted on December 15 to increase SDCs for water, stormwater and wastewater, and impose a new SDC for transportation infrastructure. They declined to impose an SDC for parks. The SDCs will rise to 40% of the legally defensible limit July 1, 2011 and to 75% of that limit July 1, 2012. In addition there will be a surcharge for ‘compliance charges’ used to administer the SDC programs. The water SDC will eventually rise from $1,472 to $3,932; the wastewater SDC will rise from $1,144 to $2,583; the transportation SDC will eventually increase to $872. The stormwater SDC will be imposed to the maximum defensible level of $844 in one jump July 1, 2011.

Toledo currently has SDCs based on 1994 calculations, with the current SDCs of $2,616 per ‘equivalent dwelling unit’ (EDU) comparing to charges between $9,000 and $12,000 for similar Oregon cities. A report prepared by city consultant Civil West Engineering showed the city could defend SDCs totaling more than $14,000 per EDU. When the increases are done in 2012, Toledo’s SDCs would total $8,231.

Read more about “Toledo’s Water Future” here.

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Water Rates Jump Early Next Year

The Toledo City Council voted December 1 to raise water rates 30% February 1. Mayor Rod Cross put the item on the agenda, saying “I’ve asked every year for 10 years for rate increases, and we need to muster the political will to do this.” The council agreed, voting 7-0 directing staff to write a fee increase resolution for the next council meeting. There was much debate about whether a set schedule should be made to raise rates by up to 90% over the next two years. For various reasons, federal funding agencies won’t consider Toledo for improvement grants until rates rise at least 60%; an 80% increase would be a safer bet. That’s important because  the city has committed to $19 million in water system improvements beginning in 2011. Phase I of that plan will cost about $3 million. Cross said the interest payment alone would be more than $250,000 a year at the conventional financing the city would be forced to use. According to figures prepared by the City Manager’s office the proposed increase would generate an additional $263,400, although the actual revenue collected would probably be lower due to water conservation.

Council member Monica Lyons offered a plan to raise water rates 30% in February, another 30% in July, 2011 and an additional 30% in July 2012. Council members were agreed on the need to bring rates to almost double what they are today. However, after debate, they decided to see how the first rate increase played out and then take staff recommendations on additional increases as part of the city’s next budget cycle.

Read more about “Toledo’s Water Future” here.

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Water Rate Hike On Next Council Agenda

[Editor's note: This article is part of our new special report series: Toledo's Water Future. Read the introduction here.]

Toledo Mayor Rod Cross has asked that a proposed schedule for water rate increases be on the December 1 City Council agenda as a decision item. Cross is unequivocal that he wants a water rate increase before he leaves office at year’s end, and also wants a clear schedule for future increases. At Cross’ request, City Manager Michelle Amberg has prepared a spreadsheet showing water increases in 10 percent increments up to a doubling of today’s rate. The document will also show the amount of revenue each level of increase would generate.

The current ‘benchmark’ residential user goes through 5,300 gallons of water per month, at a cost of $22.79. If the Council agrees with Cross, that mythical customer would eventually pay just over $45 per month.

Cross told the Wavelength he understand he will probably take a lot of heat until water customers realize that the increases are, in his words, “just the right thing to do.” He said he has been advocating incremental water rate increases for more than 10 years, “because I have been watching our reserves dwindle every year. If you don’t have the reserve money, you can’t fix all these leaks we’re having.” In addition, Cross says lending and granting agencies look not only at whether a water district is being a good steward, but if they have what lenders believe is an appropriate rate for service.

Ask many Toledo citizens about their water bill, and they will say “it is too high.” But the fact is that Toledo has enjoyed one of the lowest water rates for an Oregon city its size, and rate increases have not kept up with maintenance needs in an aging system. Cross said hardly any money was put away over the years for system upgrades. “For the longest time there was no political will to do this and we are reaping what we’ve sown,” Cross said, adding that the reason the system works as well as it does “is a testament to our Public Works Department.”

As the City moves toward rebuilding significant portions of its water system over the next few years, it will first need to look at conventional borrowing, which can be expensive. To qualify for subsidized government loans, city consultant say Toledo’s mythical $23 water bill would need to be somewhere between $36 and $38. To qualify for federal grants, it would have to be around $42.

Cross said “We have to pay for this system, and by golly while I’m mayor… we’re going to at least get started down the right road.” He indicated he would like to see the $27 rate payer’s bill jump “$5 or $6 by the end of year” and maybe $2 or $3 increases every six months until Toledo’s water rates are consistent with those in other similar communities. Cross said incremental increases are better than the type of massive increase rate hike sewer customers saw when the sewer bond was issued.

The Mayor is quick to point out that he himself is not a typical water user, noting at the November 17 City Council meeting that, raising five boys involved in athletic programs, the Cross household has an unusual amount of laundry and often sees “12 showers a day.”

As for water customers unhappy if increases are made? “They can yell at me all they want,” Cross said.

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SDCs Prepare Toledo For Future Growth

[Editor's note: This article is part of our new special report series: Toledo's Water Future. Read the introduction here.]

The Toledo City Council is expected to continue discussing the merits of increasing Toledo’s System Development Charges (SDC) at the December 1 City Council meeting. SDCs are one-time charges by municipalities on certain new construction to pay for new infrastructure capacity. SDCs are widely used to help communities expand water, wastewater, transportation, storm water and park services without charging existing customers. Toledo currently has SDCs based on 1994 calculations, charging $2,616 per ‘equivalent dwelling unit’ (EDU). This compares to EDU charges between $9,000 and $12,000 for similar Oregon cities. A report prepared by city consultant Civil West Engineering showed the city could defend SDCs totaling more than $14,000 per EDU – more than a five-fold increase.

City officials are careful to point out that SDCs are only triggered for new construction, some commercial renovation, if the new use would affect system capacity, or in instances where a homeowner turns a single family unit into a duplex or fourplex.

The largest and most important SDC category for Toledo is to pay for expansion of the water system. For example, if a developer builds a series of new homes, the water SDC charges would go in a fund to help pay for water demand those homes will make on the system – future demand. The same for wastewater or storm drainage. Council member Mark Camara, who was the council’s representative to an SDC working group, says the key is balancing the need to charge versus the ability to pay. In comments on the Wavelength website, Camara wrote “The way I see it, the main argument for raising SDCs is the idea that the same folks who create the need to increase capacity should shoulder the costs of meeting their infrastructure needs. On the other hand the argument against SDCs (is) a philosophical…perspective that it is in the best interests of the entire community to collectively subsidize new development through higher rates…because we all benefit from growth.”

Toledo resident Jake Postlewait, Manager of the Toledo branch of Oregon Coast Bank, was a member of the city’s SDC review committee. In a letter to committee members and the City Council, he asked everyone to be prudent in applying new fees too heavily, so as not to stifle growth. “I would advocate that the general approach…should be one of moderation and a desire to connect SDCs with the overall growth goals for Toledo,” he wrote. The letter continued, “A question that should be asked, ‘Is Toledo in a position to go head-to-head with coastal cities such as Newport regarding SDC fees and expect to win a good share of the market?’”

All sides have their points. And applying appropriate levels of System Development Charges is a political balancing act as well as an economic one. If the city is to grow, it needs to build out new infrastructure and ask those who create the need to pay for it. But if it charges too much, it could stifle or discourage new development. Council members are doing their homework prior to the next meeting December 1, and will consider some ‘conversion rates’ between SDCs and fees or taxes for non-enterprise infrastructure. That suggestion came from Councilor Ralph Grutzmacher, who thought it would be easier for members to consider the true impact of each SDC, if they have those numbers as a comparison. You can read the city’s SDC methodology on the “Documents” drop-down menu at www.cityoftoledo.org

Even if it is not clear yet what the increases in SDC charges will be, it is certain that at least some of them will rise. How much, and whether they will rise in one jump or in a graduated fashion, will be the subject of more public debate December 1.

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