Obtaining a land development permit is rarely simple. The process may span months or years, and involve pre-application meetings, neighborhood organizations, public hearings, open record periods and appeals. Applicants also hire lawyers, engineers, surveyors, architects and other consultants to complete the application. An appeal to the Oregon Land Use Board of Appeals (LUBA) will add time and expense.

But even after a project is permitted, the investment continues. Land development permits often include conditions of approval, including on-site and off-site public infrastructure costs. Additionally, among the most consequential — and sometimes surprising — development costs are system development charges, or SDCs. Together, these are known as development “exactions.”

SDCs fund public infrastructure associated with growth. Under ORS 223.304, they must reflect the share of projected future infrastructure costs attributable to new growth, and the projects must appear in a local government’s adopted capital improvement plan. SDCs are usually due when building permits are issued, often months or years after land use approval and completion of required public improvements. A new housing development, for example, typically requires SDCs to be paid when each home’s building permit is ready to issue.

Although SDCs help ensure the availability of growth-related infrastructure, they have legal limits. Exactions imposed through land use and building permit approvals, including SDCs, must satisfy the 5th Amendment constitutional standards established by the U.S. Supreme Court in Nollan v. California Coastal Commission (1987), Dolan v. City of Tigard (1994), and Sheetz v. County of El Dorado (2024).

Nollan requires local governments to identify an “essential nexus” between an exaction and the government’s stated regulatory interest: the exaction must further a legitimate purpose associated with the project’s potential impacts. Dolan adds a “rough proportionality” requirement, meaning its cost or burden may not exceed what is reasonably necessary to mitigate the development’s impacts. In Sheetz, the Supreme Court extended these requirements to legislatively established, broadly applicable development impact fees, such as SDCs stated in adopted rate schedules.

Not every permitting authority applies this framework consistently. Nollan and Dolan place the burden on local governments to establish the constitutionality of its exactions, and Sheetz applies that burden to SDCs. Yet many SDC ordinances place the burden on applicants to contest SDCs or SDC credit decisions. Because SDCs are imposed after land use permitting and may increase substantially before assessment, developers may not know their final obligation until years into the project. The following steps can help avoid an unexpected bill.

First, applicants should ask about SDCs early and often. Pre-application conferences are an opportunity to confirm likely obligations before committing significant resources. Planning staff can often provide the applicable schedule and a preliminary estimate. Applicants should also ask whether required infrastructure improvements, whether on-site or off-site, are eligible for SDC credits, potentially reducing the overall SDC obligation during the project’s vertical stages. Finally, applicants ought to ask whether SDCs are expected to increase and, if so, when.

Second, obtain and review the local SDC ordinance and related methodology reports or rate studies. SDC formulas and their supporting assumptions are public records. Understanding how a charge is calculated is essential to evaluating whether it is lawful. If the documents are difficult to locate or understand, applicants should seek clarification from the jurisdiction.

Third, applicants should review the local government’s capital improvement plan to determine whether they may be required to construct an identified project. A transportation system plan, for example, may list road widening, sidewalk improvements or intersection upgrades that the local government intends to construct. In many cases, developers may be required to construct some of these improvements as conditions of approval. In those cases, at least a portion of the construction costs may be eligible for SDC credits. This means that the amount of SDCs normally assessed against future construction within the project may not be imposed.

Fourth, applicants should know the applicable appeal rights and deadlines. A challenge of a land use permit condition usually must be filed within a locally established appeal period of 10–15 days, often before the final SDC amount is known. ORS 197.796 provides an additional 180 days from a final local land use decision to challenge conditions of approval, provided the applicant has exhausted local appeals. Local governments may also have separate procedures for disputing SDC calculations or denied credits. Because these rules vary, applicants should consult qualified legal counsel before paying a disputed SDC or filing a potentially contested credit request.

Finally, developers who frequently work in a particular jurisdiction should monitor its SDC methodologies, as well as its rate schedules, which often change annually. Significant proposed increases may warrant early legal review or participation in the legislative process undertaken to adopt them. Notice of a change is provided only to parties that have asked the local government to notify them, so developers should request to be put on the local government’s notification list.

With development costs rising and exactions law evolving after Sheetz, developers and builders should carefully consider how ever-increasing SDCs might impact their projects. Experienced counsel can help applicants better anticipate exposure, negotiate conditions, and preserve their rights concerning jurisdictionally required infrastructure costs.

Garrett Stephenson is a Schwabe, Williamson & Wyatt shareholder. Contact him at 503-796-2893 or gstephenson@schwabe.com.

Roseann Johnson is a Schwabe, Williamson & Wyatt land use project planner. Contact her at 503-796-2474 or rjohnson@schwabe.com.

This column is intended to provide readers with general information and not legal advice. Consult professional counsel for help regarding specific situations.

The opinions, beliefs and viewpoints expressed in the preceding commentary are those of the authors and do not necessarily reflect the opinions, beliefs and viewpoints of the Daily Journal of Commerce or its editors. Neither of the authors nor the 91��Ƶ guarantees the accuracy or completeness of any information published herein.

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