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City of Puyallup

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AI- 3905   10.    
City Council Agenda
Meeting Date: 09/03/2013  
Subject:    System development charge exemption for low-income housing
Presenter: Bill McDonald
Department: City Manager's Office  

Information
Recommended Action
This item is being brought forward at the request of a councilmember for consideration. This issue arose from previous discussions at two Council meetings relating to a requested rezone of a mobile home park.
Background
Interest has been expressed in exempting low-income housing from system development charges. A draft ordinance was prepared for Council's review and consideration.

I.  What is a system development charge?
The terms “connection charge” or “hookup fee” or “facilities charge” or “system development charge” refer to the one-time charge that an applicant pays for connecting to a water or sewer system.  Connection charges are a contribution of capital typically composed of an amount to reimburse existing customers for the available system capacity and an amount that helps finance future improvements to the system.  In Puyallup, connection charges are called system development charges and include an “existing facility component” and “future facility component”.  PMC 14.01, Appendix A and see PMC 14.02.040.

II.  Can the City waive or allow customers to delay payment of connection charges?
Yes.  Washington law allows cities to waive or delay collection of connection charges for low income persons or a class of low income persons.  RCW 35.92.380.  However, the waiver or delay must occur pursuant to a program established by ordinance.  RCW 35.92.380.

III.  Does the City have an existing SDC adjustment process for low income housing?
Yes, but it is limited in scope to low income housing for seniors.  PMC 14.10.020.  And, impacts to the city’s existing system and CIP must be recovered fully.
Previous Actions (Discussions/Presentations)
The question of whether to implement system development charge exemptions for low-incoming housing arose during last year's Comprehensive Plan amendment process when an applicant sought a rezone of the Meridian Mobile Home Park property.
Summary of Proposal
This is a discussion item to consider a draft ordinance that would authorize system development charge exemptions for low income housing.

The draft ordinance is modeled after RCW 82.02.060.  Under the draft ordinance, the City could either:
  1. Grant a partial exemption of not more than eighty percent of SDCs, in which case there is no explicit requirement to pay the exempted portion of the SDC from public funds other than impact fee accounts; or
  2. Provide a full waiver, in which case the remaining percentage of the exempted SDC must be paid from public funds other than SDC accounts.
Also, an exemption for low-income housing must be conditioned upon requiring the developer to record a covenant that prohibits using the property for any purpose other than for low-income housing.  At a minimum, the covenant must address price restrictions and household income limits for the low-income housing, and that if the property is converted to a use other than for low-income housing, the property owner must pay the applicable impact fees in effect at the time of conversion.
Alternatives/Options
The paramount question is whether the Council is interested in implementing SDC exemptions for low income housing.  (Note:  An SDC exemption for low income housing will result in a subsidy.  All of those that pay system development charges will effectively pay SDCs on behalf of low income housing.)
 
If the Council is interested in implementing SDC exemptions for low income housing, it would be helpful if the Council provided direction with respect to the following issues.
 
Policy
  • What is the definition of low income?  Should the City use the HUD standard or is some other standard appropriate?
  • Should an SDC exemption apply to owner occupied or tenant occupied housing or both?
  • Should SDC exemptions apply to all potential low income housing throughout the City or just mobile home parks?
  • Should SDC exemptions be allowed sporadically, such as for individual units or parts of residential areas, or to whole residential areas or to any combination of the foregoing?
  • Should low income housing be eligible for both SDC reductions and rate reductions?  (Tenants are more likely to care about rate reductions, while developers are more likely to care about SDC exemptions.)
  • Should SDC exemptions be available to housing that is occupied by low income persons or housing that is owned by low income persons or both?
  • If SDC exemptions are granted, should there be corresponding rent controls?
 
Administrative
  • How should compliance monitoring and verification occur?
  • Should the City allocate staff resources to administer SDC exemptions for low income housing?

Fiscal Impact
Attachments
Draft ordinance

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