Bend man halts building ADU after city charges nearly $60,000 in SDCs, fees; city says it’s too big to be an ADU

(Update: Adding video, comments from Bend homeowner, city's chief operations officer)

BEND, Ore. (KTVZ) -- A Bend man is speaking up about his experience over the last couple of years in dealing with the city of Bend after he says they tried to charge him $33,000 in system development charges (or SDCs) and require other costly improvements to build an accessory dwelling unit (ADU) on his property.

Mike DeSouza has been a Bend resident for over two decades. Back in 2021, he drafted up plans to build an ADU on his property that he wanted to use as a rental unit for extra income, due to being close to retirement age.

An ADU, or accessory dwelling unit, is a secondary housing unit on a single-family residential lot.

DeSouza was set to build his project -- until the city informed him of the SDC fees, which he says add 10% more to his building cost. DeSouza also said it'll cost another $25,000, on top of the $33,000 SDC fees, to run a new sewer and water line from his ADU to his current system, at the request of the city.

DeSouza explained Tuesday, "We we're budgeting for $200,000. And $33,000 of that just in a fee just seemed astronomical."

According to the city, system development charges are fees that developers pay to ensure that new development pays for the costs associated with Bend’s growth.

The city says for fiscal year 2022-23 (July 1, 2022 to June 30, 2023), the city paid the Bend Park and Recreation District $10,961,365 from SDC payments collected by the city.

Transportation, water, wastewater and park SDCs are all collected by the city.

SDC fees are usually between 6% to 10% of a project's total cost. "And then a big one was having to run a new sewer line across the street. Came to a tune of close to $20,000 just to run the sewer line. They wouldn't let me tap into my current one because it's undersized," DeSouza said.

Russ Grayson, the city's chief operations officer, told us Tuesday, "Sometimes we have properties who don't have services coming off the main street. So yeah, sometimes they have to open the street and make a new connection to serve their property."

DeSouza said he was motivated to contact NewsChannel 21 after hearing about a similar case currently going on in Lake Tahoe.

There, a man named George Sheetz is suing El Dorado County over a $23,000 SDC fee, due to where he wants to place his manufactured home.

"We're not developers, we just want to put a little bit of an improvement" (on our properties)," DeSouza said.

According to the city of Bend, DeSouza is considered to be building a duplex, due to his project being 900 square feet in size, resulting in higher fees. A unit is only considered an ADU if it stays under 800 square feet.

DeSouza is bothered by how big businesses get tax exemptions, while the city doesn't seem to be helping the 'little guy."

"Bend is encouraging homeowners to do this (build ADUs) to help relieve the rental market," he told us by email last week. "But they are not doing anything to help out with the costs. And now I'm hearing that the new buildings being built on the old Les Schwab lot get a 10-year tax exemption and possibly exemption of the SDC fees."

Grayson described how the city breaks down ADU sizes: "But if you're adding another unit that's over 800 square feet, then it's kind of another residential unit being added onto that property that's being assessed on a different rate schedule, which is higher than when an ADU gets assessed."

Grayson says DeSouza last drew a permit from the city in 2022, but has no active permit on file currently.

DeSouza told us he plans on starting construction back up on his ADU next year. "I'm not going to let a fee keep me from investment property. I'm getting close to retirement and the overall benefit will outweigh these upfront costs."

The city's current, extensive revision process for SDCs also has been drawing ire over some significant proposed increases for commercial development, prompting the city council recently to extend a public hearing so more discussions could occur with affected parties.

According to Bend Mayor Melanie Kebler, as recently as December, Bend currently needs about 4,000 housing units to meet its shortage citywide.