SEASIDE - Builders who want to construct affordable housing in Seaside are having second thoughts when they see how much it will cost in fees to obtain a building permit, a local attorney told the Seaside City Council Monday night.
Donn Bauske asked the council to consider reducing the fees - also called system development charges - so builders could afford to construct homes in the city.
Bauske, who sent a letter to the council prior to the meeting, said in the letter that he had planned to build a house that would have cost $125,000 and to sell it for $200,000.
"After I figured the cost of construction, the cost of the land, the cost of system development charges, the building permits and additional water/sewer hookup charges, there was no profit in it whatsoever," Bauske wrote.
"The house would sell for $200,000 in today's market, and the cost of construction, plus the cost of land, would be approximately the same, if not more."
Bauske said he had withdrawn one building permit application and he knew of two or three other builders who have withdrawn applications or have not submitted plans because of the higher fees.
System development charges add an average of $9,898.11 per building permit for a single-family dwelling valued at $200,000 or less, Bauske said.
"It's obvious that this 5-percent increase on a $200,000 house is part of the straw that breaks the camel's back on the profit margin and the desire by developers to build new dwellings," Bauske said in his letter.
It costs basically the same in fees to build a $1 million house as it does to build a $200,000 house, Bauske added, except that the fees make up only 1 percent of the overall sales price, instead of 5 percent.
He suggested that the system development fee be charged on a sliding scale, based on the proposed construction cost. Or, he said, the city could waive the system development charges or reduce them substantially for the next two years to encourage construction.
Other cities, including Molalla and Gresham are waiving some of their fees, Bauske said, and Roseburg has reduced its transportation development fee.
The council increased the system development charges in August 2008 to accommodate its capital improvement plan for parks and recreation and wastewater treatment. Funds from the development charges go to improve those services.
For residential units, including single family, multi-family and mobile homes, the fee for each unit went from $325 for parks to $1,699.11 and the fee for water, at $2,873, was unchanged.
Increases for the size of water meters to be installed also jumped. A 5/8-inch or a 3/4-inch meter, for instance, went from $675 to $4,882. The fee for a 1-inch meter rose from $1,127 to $8,153; a 2-inch meter, from $3,598 to $26,021.
The fees continue to steadily increase as the development grew larger: An 8-inch meter went from $35,998 to $260,357 and a 10-inch meter, from $51,752 to $374,303.
The parks fees for tourist accommodations, including vacation units, went from $230 to $1,655.26.
Resorts or hotels, not including restaurants and retail outlets, would pay a parks fee that increased from $230 to $1,090.20. New retail outlets and restaurants would see their fee for off-street parking spaces rise from $140 per space to $783 per space.
Bauske noted in his letter that 27 permits for new single-family dwellings were issued in the calendar year between January and December 2008 for an average value of $230,413.
But in 2009, after the economic downturn occurred and the new development fees were in place, only six new construction permits were issued, for an average value per permit for $167,665.
During the first two months of 2010, only one new construction permit - for a $200,000 house - has been issued, Bauske said.
However, noted City Manager Mark Winstanley, during the past nine months of the city's fiscal year, which started July 1, the city collected more money than it did all during the fiscal year of 2008-2009.
"We don't set the system development fees arbitrarily," Winstanley said.
"They are established on what fees will be necessary for increased growth if growth continues to take place as fast as it has in the past."
The increases, said Public Works Director Neal Wallace, were based on a study done by a consultant knowledgeable about current costs to develop parks and wastewater systems and the fees charged by other municipalities.
City Councilors Tim Tolan and Jay Barber said they wanted to take another look at the fees.
"At the time we implemented this plan, the economy was at a very high point," Tolan said. "Maybe we ought to look at them and see if they need adjustment to stimulate the economy."
Mayor Don Larson, who noted that the council had spent several work sessions reviewing the charges before adopting the new fees, asked what the council would tell builders who had already paid the higher fees.
"That is one of the leading questions we will have to deal with," Tolan said.