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3. Monitoring anal verification of the savings and repayment schedule are needed. <br />4. Bond rating agencies may downgrade an entity's bond rating due to the presence of an <br />"internal deficit." <br />Applicability: MWMC will make use of internal borrowing to provide interim financing for <br />projects and allow the Commission to sell bonds at the optimum time, considering the current <br />economic environment, interest rate and issue size. <br />NON-DEBT FINANCING INSTRUMENTS <br />Systems Development Charges <br />Description: SDCs, also known as Impact Fees, aze fees collected by local governments to offset <br />the costs of public improvements associated with new development. SDCs aze not a tax. They <br />are one-time fees collected for a specific purpose and, in Oregon, may only be used for capital <br />improvements. <br />Actual Use: Under Oregon law, SDCs can be charged for capital improvements associated with <br />a) water supply, treatment and distribution; b) wastewater collection, transmission, treatment and <br />disposal; c) drainage and flood control; d) transportation; e) parks and recreation. Certain SDC <br />revenues may only be expended on capacity-increasing capital improvements, while other SDC <br />revenues may be used for capital improvements in general. An administrative fee may also be <br />collected with SDCs and expended on the administration and accounting of the SDC program. <br />Potential Use: Other states allow collection of SDCs for schools, public safety (fire, police, <br />emergency medical services) and other infrastructure and services. In the Oregon legislature, <br />several attempts have been made over the past decade to expand the use of SDCs to one or more <br />of these uses, but none have succeeded to date. <br />Advantages: New users of services purchase an increment of existing and new capacity. This <br />results in enhanced equity between current and new users. It also reduces the cost burden on <br />current users. <br />Limitations: SDCs do not provide capital much in advance of development. Capital <br />improvements often add capacity that will be consumed over an extended period of yeazs. SDC <br />revenue is dependent on the rate of development which can be highly dependent on many factors <br />and tends to fluctuate from yeaz to yeaz. SDCs are criticized for deterring development and <br />increasing new housing costs, and resulting in interjurisdictional competition. Developers may <br />pass on SDCs to residents. Communities may change their policy preferences depending on <br />economic and political conditions, for example, implementing or discontinuing SDC <br />exemptions/credits to stimulate or discourage development. <br />Applicability: SDC revenue is an important financing tool. Reimbursement SDC revenues may <br />be expended for capital improvements in general. Improvement SDC revenues may be used on <br />capacity-increasing capital improvements only. <br />User Fee Financing <br />Description: User Fee Financing is also known as "pay-as-you-go" financing. As the name <br />implies, current revenues and reserves are used to fund the capital program, either in whole or in <br />P~- <br />2005 MWMC Financial Plan - Appendix II Page 38 <br />