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House bill would use SDCs to pay for new schools

A bill authorizing systems development charges (SDCs) to be used to pay for new schools is before the Oregon Legislature.
   House Bill 2525 adds schools and classrooms to the definition of "capital improvements for which SDCs may be imposed," according to the bill. The bill also provides that the amount of SDCs collected may not exceed the amount required to acquire land or construct school buildings and classrooms. Affordable housing would be exempt under the SDCs bill.
   Currently, SDCs can be used to help pay for parks, street and sewer projects.
   Crook County School District Superintendent Steve Swisher had some concerns with SDCs for schools, but supported SDCs that would help in other ways.
   "My general concern about SDCs for schools [is that they] may leave the general public and taxpayer the impression that if this bill is enacted, it will take care of the entire school construction costs and bond measures will not have to occur in the future," Swisher said. "In fact, only a small portion of school construction costs would be covered by SDCs should the bill be enacted."
   "I do favor an SDC that would help in the purchase of property, infrastructure development (streets, sewer, water, etc.) and engineering, architectural and other planning costs," Swisher said. "Often those are costs that must be expended before a bond is passed, and currently there is not a funding mechanism for such items through the state school support funds."
   Swisher was uncertain as to the future of the current bill.
   "I am not sure the current version will pass, but the homebuilders association has been working with legislators on drafting language, so there may be a chance of some version of this passing for the first time," the superintendent said.
   Rep. George Gilman (R-District 55) said he thought the chances of the bill's passage is 50-50.
   "HB 2525 is not a bad bill, but I generally don't support a tax without a vote of the people, and it would raise the cost of housing in general, even with the exemption," said Gilman, whose district includes Crook and Lake counties, as well as parts of Jackson, Deschutes and Klamath counties.
   Gilman also spoke about how much the proposed bill would help pay for new school construction, saying "HB 2525 would not completely solve the school construction issue."
   State Sen. Doug Whitsett has a variety of concerns with the bill.
   "Systems development charges are among the most regressive of taxes," Whitsett said. "They are added to construction costs, passed on to the prospective new owner and are amortized into any mortgage on the property. At current interest rates, that amortization triples the repayment of the SDC over a 30-year mortgage. The taxation is inequitable, because only new construction bears the cost of new school construction, while all school district patrons are potential beneficiaries."
   Whitsett represents District 28, which includes Crook, Klamath and Lake counties, as well as parts of Jackson and Deschutes counties.
   Whitsett said that currently school district residents are "afforded a property tax vote on whether a school should be built and on what the school should cost."
   "The SDC scheme creates a tax on property that results in a fund for the districts to use for school construction that bypasses voter authorization," Whitsett said.
   "As I understand the bill, an SDC may be imposed to acquire land and construct a school without limitation, so long as the amount collected does not exceed the actual cost of the land acquisition and construction costs," Whitsett said. "Once again, the bill does not provide for voter or district patron oversight," the senator added. "This concept is not new. A similar bill was introduced last session, but failed to become law. With the current tax and spend atmosphere in the capitol, that could change. SDCs for school construction are an end run around voter authorization for new school construction. District voters have always maintained control of school construction costs. The SDC avoids that spending control as well as shifting the cost to owners of new residences."
   The bill had its first reading on Jan. 30. HB 2525 was later assigned to the Subcommittee on Education Innovation on Feb. 15.
   "No date for a public hearing on the House side has been scheduled as yet," Gilman added.