The Hermiston City Council voted Monday night to increase system development charges (SDC) on new single-family homes.
The current total SDC charged for a new single-family home is $907. The new SDC will increase incrementally over the next four years when it will then increase by 3 percent annually to keep up with inflation. That means beginning January 2026, the SDC charge will amount to $1,768.16 for each new single-family home.
Hermiston Assistant City Manager Mark Morgan said Hermiston’s SDC hasn’t been increased since it was first adopted in 1998, while inflation has increased by 104 percent over that time. A separate parks SDC was adopted in 2006, also without any subsequent fee adjustments. Inflation since 2006 has gone up 56 percent. The new SDC schedule includes the parks charge.
Morgan the city is trying to balance being fiscally responsible while encouraging housing developments.
“System development charges are one of the ways that these two goals have the potential to come in to conflict, because we want to make sure that our fees are appropriate for the long-term financial health of the city, while also making sure that we keep development fees affordable, because we know that any increased cost on development has a direct impact on housing affordability,” said Morgan.
City staff spoke with a number of local homebuilders throughout this process, and settled on the proposed four-year phase-in approach, said Morgan.
“One of the ways that we settled on to minimize the impact on the development community is to phase the inflation-driven catch-up adjustment over the next four years,” he said. “We hope that providing the development community with four years of certainty on these changes will help mitigate a lot of the uncertainties that they face right now with interest rate and materials price volatility.”
Recent examples include the price of lumber over the past year, with futures peaking at $1,670 on May 7, from a price of $700 in January. Since May 7, those prices are already back down to around $900.
Morgan said actual revenue impacts for the city are difficult to project, as revenue is dependent on the pace of development. The past several years has seen a number of new developments in Hermiston. Through May of this year, the city has collected $148,000 in water, sewer and parks SDCs, compared to just $43,964 through the first five months of 2015.
And through June 22, the city has already already issued 62 permits for single-family homes.
“In 2020, we hit 101 for the year, and in 2019 we were at 82,” said Morgan. “So things can certainly cool off, or change, but at this rate, we could be on pace for 100 to 120 new homes in 2021.”