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New system created for tracking funds for System Development Charges in city.

To ensure Wood Village doesn't run into trouble managing revenue generated from its System Development Charges (SDCs), the City Council on Tuesday, March 26, approved a budgetary fund setting aside money raised from the fees.

SDCs are initial fees paid by developers to construct buildings and other projects. Mismanaging SDC funds is a common issue cities face, noted Wood Village City Manager Bill Peterson at the March 26 meeting.

By Oregon law, money collected from the charges must be spent exclusively on projects that improve the system from which they were collected.

For example, if an apartment developer pays a water SDC, the city must spend the money generated on a project improving the municipality's water system. Wood Village collects parks, water and sewer SDCs.

"The collected revenue for parks can only be used for parks," Peterson said. "Sewer (funds) can only be used for sewer. Water (funds) can only be used for water."

Wood Village staff hasn't had to worry about using SDC funds inappropriately because the city's three SDC fees have not historically generated that much revenue, said Wood Village Finance Director Seth Reeser, and the money raised was spent from the city's general fund immediately on eligible projects.

However, as Wood Village grows, increased development is generating more SDC revenue.

"In the last two years, we're starting to build up a significant balance from these System Development Charges," Reeser said. "If we start to build up a large SDC bank that becomes a little more problematic to manage, and it's something you really have to pay close attention to."

State regulation agencies maintain a vigilant eye on how SDC funds are spent, added Wood Village City Attorney Jeff Condit.

"If we have a clear separation in the budget, we can point that and say, 'no, we don't (misspend the funds),'" Condit said.

Mayor Scott Harden said crafting another fund doesn't immediately guarantee funds won't still be mismanaged.

"If we could accidentally spend it while it's in the (general) fund, what's to say we couldn't spend accidentally some stuff in the new fund," Harden asked.

Reeser responded that when Wood Village identifies an SDC-eligible project, money from the new fund will be transferred into the general fund creating a distinct transaction for any money spent on SDC-eligible improvements.

"Then you would be able to show the money was transferred after the work was completed," Reeser said.

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