A revealing exchange about funding from city council work session

Commissioner Mingus Mapps asks questions at the city council work session on housing production.

Bike parking was the focus of our coverage Tuesday about the Portland City Council work session on housing production. But to me, the bigger transportation issue is how we pay for public infrastructure, things like bike lanes, sidewalks and sewers.

Commissioner Mingus Mapps initiated an exchange on this topic at the work session that deserves attention because it touches upon important issues Portland currently faces: how to pay for upgrading the backlog of inadequate transportation infrastructure in neighborhoods across the city — and how to stop adding to it.

Mapps began by asking about city incentives for building affordable housing. In response, consultant Matt Fairris from BAE Urban Economics brought up allowing more exemptions from System Development Charges (SDC) as one incentive to build.

Mapps responded:

I’m your infrastructure guy on council, so I build water, sewer, roads, sidewalks, which we largely fund with SDCs. So there is this kind of puzzle, we can build a house but if that house doesn’t have a toilet that’s gonna be a problem. But I did notice in your data that Seattle didn’t have SDCs, although it was more expensive to build there.

Can you tell us how Seattle pays for roads, sidewalks and sewers?

Fairris replied:

The way that Seattle does SDCs and impact fees is they, instead of just charging the development community [a fee] … The City of Seattle pegs it to the development community and says, “we need a new street light, you have to build a new street light, developer.” We need new sewer infrastructure on this road, you developer have to do this as part of your cost … The cost to build, the “hard costs” are higher … because you are having to do some of this other infrastructure that, in the City of Portland, we charge SDCs and have the city tackle that.

And then Christina Ghan, who is the Policy Director on Commissioner Rubio’s staff and was facilitating the work session, stepped into the conversation:

Can I add one extra fine point on that—I came down to Portland from Seattle. Those improvements that Matt spoke to are all directly adjacent to the site, they are not located in the general vicinity, or elsewhere across town. They are hyper-localized costs that the developer pays for.

Mapps followed up:

Do they have an equity strategy? One of the things we try to do in Portland—historically Portland let’s say east of 82nd has been neglected in terms of investments of infrastructure, although it’s become much less true today. But one of the reasons it is much less true is that we use some of our SDC fees to build in underdeveloped parts of the city. Does Seattle have a strategy …

Ghan responded that Seattle relies on other financing tools.

Findings from a four-city cost comparison done by BAE Urban Economics.

Ghan’s point that Seattle’s developer improvements are adjacent to the site — i.e. “hyperlocal”— touches upon what has long been a sore point in Portland for both neighbors and developers.

Portland’s Transportation SDCs (TSDCs) do not have to be spent near the development. PBOT uses them as a revenue stream for projects across the city. This leads to a typical southwest Portland interaction in which a neighborhood association demands a sidewalk; the developer responds that they have paid tens of thousands of dollars in SDCs, and PBOT’s development review desk tells neighbors that the road doesn’t have the stormwater capacity needed to support a sidewalk — so pedestrian facilities go unbuilt.

A truism among southwest transportation advocates is that all SDC monies flow east. I have never repeated that in my three years at BikePortland, I’m not a forensic accountant and would never be able to verify it. But it was noteworthy that a city commissioner publicly mentioned SDC distribution. The rub is that southwest also has a stack of unmet infrastructure needs, in particular an absence of stormwater facilities and the resulting lack of sidewalks and sparse bicycle network.

[UPDATE 7/27/2023 – 11:15 AM: A reader brought to our attention the 2021 TSDC Annual Report which contains information about TSDC revenues and expenditures, and segregates the money flow by district. It appears that the inner east districts have the biggest gap between TSDC collected and spent, as of 2020-21 for the current cycle beginning in 2017.]

The exchange between Mapps, Fairris and Ghan suggests that there might be a more efficient way of meeting equity and transportation goals. The uncertainties, conflict and suspicions created with project-by-project charges might cost the city more than it realizes.


The comparable cities analysis between Portland, Denver, Seattle and Sacramento can be found in the study BAE Urban Economics did for the City of Portland.

Video of the work session is here.

Reports referenced in the session are available at Commissioner Rubio’s website.

Lisa Caballero (Assistant Editor)

Lisa Caballero (Assistant Editor)

Lisa Caballero is on the board of SWTrails PDX, and was the chair of her neighborhood association's transportation committee. A proud graduate of the PBOT/PSU transportation class, she got interested in local transportation issues because of service cuts to her bus, the 51. Lisa has lived in Portland for 23 years and can be reached at lisacaballero853@gmail.com.

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joey Campbell
joey Campbell
8 months ago

There are poor people all over the city butany more concentrated in east Portland. If you are poor you are more likely to walk to meet.your daily needs. If the city doesn’t have enough funds to do all the things, where should they spend their funds, in places without sidewalks where more people have to walk because they don’t have a car, or in places without sidewalks where more people are just walking for exercise? Also, the arterial road density in east Portland means people walking there are exposed to many more vehicles. I’m not saying SW doesn’t deserve sidewalks, everyone does! But how do you as a public agency do the.most good for the most people in need of the public good?

Fred
Fred
8 months ago
Reply to  joey Campbell

This is a crazy argument that pits Portlanders against each other. Plus how do you know I’m “walking for exercise”? My walking is a climate-fighting strategy! – as is my cycling and running (yes, it’s really fun to do a run for your commute).

Your argument works both ways: next you’ll say that since there are no sidewalks in East Portland, everyone *HAS* to drive. We hear this claim all the time on BP.

The bottom line is that public infrastructure improvement should accompany private development. It’s a measure of how messed up Portland is that we actually argue about WHO gets to be killed in traffic.

Brendan
Brendan
8 months ago

very enlightening, thanks for sharing this!

Will
Will
8 months ago

SDCs are a new revenue tool brought about due to the effects of Measures 5/50/47. Outside of immediate site-specific infrastructure upgrades that a development might require, funds for improvements to the right-of-way should come from the General Fund IE property taxes.

Southwest also doesn’t generate much in the way of SDC revenue, and the amount it generates is largely spent in Southwest. That’s not to say that the infrastructure needs in Southwest aren’t real, or that they’re getting the appropriate allotment of revenue.

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Charley
Charley
8 months ago
Reply to  Will

From the chart, it looks like NE and SE are the two districts that subsidize outer Portland.

David Hampsten
David Hampsten
8 months ago
Reply to  Charley

Given how few people actually live in Central City, I’d say Central City gets far more than they deserve – they should be subsidizing the inner neighborhoods, SW and EP, since before 2010 they were getting over 80% of the total SDC dollars – now it’s “only” a third. It should be no more than 10%, particularly given the post-covid changes to commuter patterns.

maccoinnich
8 months ago
Reply to  David Hampsten

Lots of people live in the Central City (which includes not just downtown, but also the Pearl, Goose Hollow, South Waterfront, Central Eastside, etc). And, more importantly to the conversation, it’s where a lot of growth has occurred over the last decade.

Daniel Reimer
8 months ago
Reply to  maccoinnich

Not only that, but as someone living in SW, most of my trips to other parts of Portland even if not downtown requires me to go through some part of the Central City.

Improvements to the core benefits a lot more people than just those living there.

Will
Will
8 months ago
Reply to  Daniel Reimer

The Central City area used for that chart has about 130,000 jobs and about 40,000 people living in it. SDCs apply to commercial/office construction as well as residential.

joan
8 months ago

Hi Lisa, respectfully, I don’t think your update quite covers the facts. The update says that the central eastside pays more than it gets, but it doesn’t also say that southwest gets as much as it gives, which was the assertion.

qqq
qqq
8 months ago

I pretty much agree with all that.

The initial justification for charging SDCs was that new development places added demands on existing infrastructure, so it’s fair to ask the development to pay for improvements to cover the new demands.

So following from that, it makes sense that a project’s transportation SDCs go to pay for improvements at least close to a project, but not necessarily always on the site.

But it makes a lot less sense for the money to go elsewhere. It seems like that means that either a) the demand on the transportation system that the development is creating is being left unaddressed, or b) there are no improvements needed at/near the development.

If the SDCs aren’t going to address the added demand on the system at/near that location, the neighborhood is definitely being shortchanged, like you said. Alternatively, if no improvement are needed, then the development isn’t placing any stress on the existing system, so it really shouldn’t be being charged.

Nick
Nick
8 months ago

I’m not going to say there’s nothing to learn from Seattle, but having grown up there and lived there as an adult, a big part of why I live in Portland is because of biking and general affordability.

There’s probably a balance to be struck somewhere between hyperlocal development related improvements and fixing the rest of the city. If the specific issue is sidewalks, then our building code should cover that more thoroughly (I agree that every new building should have good sidewalk access).

I live in East Portland and we don’t have full sidewalk coverage (or even fully paved streets), but I think this is one of those situations where you’ve got people fighting over the scraps compared to say the amount that gets spent on big road improvements, and other city functions that don’t benefit people as much.

Charley
Charley
8 months ago

I know articles like this probably don’t generate the same number of views and comments as articles about urban camping or whatever, but they are such a public service! Especially since other local general interest outlets leave these root issues uncovered.

David Hampsten
David Hampsten
8 months ago

My home town of Grant Forks ND required (and still does) all developers to put in streets, sidewalks, sewers, utilities, streetlights, driveways, and corner ramps with those yellow dimples before a single basement and house can be built. Sure it costs more, but they still make a profit – it’s just the cost of doing business in Grand Forks ND. Any developer who doesn’t follow the rules doesn’t get city water hooked up. Growing up there, I never thought of the community as particularly progressive, but with a nearly 99% complete sidewalk network and over 100 miles of off-street paved paths, it’s light years ahead of Portland and the community I live in now, Greensboro NC. They even have outdoor electrical outlets along some of the city streets (for block heaters, but they can just as easily be used for EVs too.)

Fred
Fred
8 months ago
Reply to  David Hampsten

Hear, hear, David – let North Forks and other smart places show us the way:

Make adjacent street improvement the cost of building in Portland, and watch how our streets improve. End this stupid bickering about who deserves SDCs more.

Chris
Chris
8 months ago
Reply to  David Hampsten

That’s nice. So when Grant Forks annexed large swaths of partially developed county land they upgraded the services of that area. That’s partially what Portland promised, but never follow through on.

cct
cct
8 months ago
Reply to  Chris

You will note that examples where cities require these things, they are CONSISTENT in doing so, have standards of expected improvements that are policy and public, and defend them in court.

Portland has/does none of these.

Instead, Portland has allowed a manager to decide that in essence developers will not build infrastructure – they city will,.. in massive projects like Capitol Highway. So, one section of street, every 20 years. The Sun will have consumed the Earth before they finish in SW.

Serenity
Serenity
8 months ago

Seattle’s system sounds much more efficient.
What happens when the city runs out of SDC funds?

maccoinnich
8 months ago

At least PBOT uses the SDCs they raise. Parks dramatically increased the cost of their SDCs in 2016, and the result was that between 2017 and 2023 the balance in their capital improvement fund went from $100 million to $187 million. They don’t have a capital improvement plan that spends anywhere near that amount of money.

Fred
Fred
8 months ago
Reply to  maccoinnich

Are you saying Parks doesn’t need to plead poverty all the time? – that they have more $$ than they can spend. Please do tell more.

Will
Will
8 months ago
Reply to  Fred

They have a surfeit of capital dollars due to SDCs, and a lack of operational and maintenance dollars. SDCs can only be spent on capital projects.

joan
8 months ago
Reply to  maccoinnich

I don’t understand why pausing Parks SDCs isn’t higher on the list of short-term options. And is it the case that the state legislature would have to intervene for SDCs to be used for other than capital projects?

Will
Will
8 months ago
Reply to  joan

The State can’t change what SDCs are used for. Their constitutionality and allowed uses were settled by the US Supreme Court in Nollan v California Coastal Commission, Dolan v City of Tigard, and Koontz v  St. Johns River Water Management District.

Fred
Fred
8 months ago

Thanks. Lisa, for this excellent reporting, which shows how utterly screwed up Portland’s development system is.

When I lived in California, a developer *could not start building houses* until s/he had improved the adjacent street. The city would simply say, “The street must be widened to four lanes with a bike lane, plus sidewalks, plus you need to build all of the stormwater infrastructure. We will approve your plans and inspect your work at various points in the construction process and then sign off on 95% completion BEFORE you can build a house.” This system, which it sounds like Seattle has also, aligns the incentives in the right order: the developer wants to build houses so s/he has an incentive to improve public infrastructure; the public gets what it needs from the development; and people eventually get houses with DECENT local infrastructure.

But Portland’s system ensures NO incentives are aligned: the developer doesn’t want to pay for any infrastructure b/c she doesn’t have to, plus it drives up the cost of every project; the public gets no improvements, even though the development imposes big day-to-day costs (like deaths of road users); and buyers of the new houses have no place to walk, ride, or roll.

I suspect Portland’s system came about b/c local politicians viewed the SDCs as a kind of pork barrel they could draw from for their pet projects. But this process has ill served Portlanders. Time to end it and become more like Seattle!

Matt
Matt
8 months ago

Maybe it’s just me, but Mapps’s phrasing, “I’m your infrastructure guy on council, so I build water, sewer, roads, sidewalks […]” seems weirdly egocentric to me. I mean, insofar as Mr. Mapps doesn’t personally build any of that stuff; he just helps in planning and approving it or what have you. Maybe I’m just not cut from the same cloth as a politician.

Matt
Matt
8 months ago

I’ve definitely misspoken more times than I could hope to count; but that’s just not the type of mistake I tend to make or see typical people make either.

Serenity
Serenity
8 months ago

Yes.Very true.

socially engineered
socially engineered
8 months ago

*taps sign*

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curly
curly
8 months ago

Thanks Lisa for the research and effort put in to this article. TSDC funds are discretionary funds that pad many projects in the pipeline that have gone over budget because of the delay times associated with capital improvement projects. Especially in east Portland. Such was the case with Division St. Over $7 million in SDC funds were dedicated for the safety project in 2020, and almost $2 million to the 4M project. That’s why east Portland’s numbers are so large for SDC funds.

While east Portland received more SDC funding than it generated, we also added about 500 units of affordable housing (exempt from SDC charges) in the Powellhurst/Gilbert neighborhood alone, with more to come. If we were building more market rate housing in the neighborhood, I would think we would generate more SDC funding. The city has designated east Portland (and NW) as the places to build affordable housing. While developers tout the number of units of affordable housing built in NE and SE, it pales to the amount of units built in east Portland.

While we’re discussing SDC funding, let’s chat for a moment about BES funding. East Portlanders pay “offsite” stormwater management fees, yet receive very little of these funds for capital improvement projects compared to inner NE and SE. https://www.portlandoregon.gov/bes/78278
While SW, NW, SE and NE all have stormwater management issues which need to be addressed, east Portland does not. Virtually all our stormwater is dealt with onsite. We’ve been paying for bioswales and other stormwater management features being installed in the inner east neighborhoods for 30 years now. Most of the inner city’s stormwater flows into the sewer system causing overflows into the Willamette river. Where is the equity in that?

GlennF
GlennF
8 months ago

what about the 3% franchise fee / public utlitly fee on some/all bills..
was there not talk about tighting the language around this fee to make all the funds go to PDOT for street repair & maint. as was originally intended.

Serenity
Serenity
8 months ago
Reply to  GlennF

Why would there be?