Stormwater Utility Feasibility Study

Transcription

1 Report Stormwater Utility Feasibility Study City of Lake Mills, WI April 2007

2 Report for City of Lake Mills, Wisconsin Prepared by: STRAND ASSOCIATES, INC. 910 West Wingra Drive Madison, WI April 2007

3 TABLE OF CONTENTS Page No. or Following EXECUTIVE SUMMARY SECTION 1 INTRODUCTION 1.01 Introduction Stormwater Management Activities Current Stormwater Management Expenditures Abbreviations and Acronyms SECTION 2 BACKGROUND INFORMATION 2.01 Stormwater Utilities Background Information Other Funding Options SECTION 3 ESTIMATION OF ERUS AND RATES 3.01 Impervious Area Analysis and Equivalent Runoff Unit Estimate Potential User Fees and Rate Structures SECTION 4 EVALUATION OF STORMWATER UTILITY IMPACTS 4.01 Stormwater System Cost Reallocation Impacts on Individual Properties TABLES Stormwater Management Program Expenditures Current Estimated Stormwater Funding Contributions (Budget 2006) Estimated Impervious Areas and ERUs Potential Revenue per Monthly ERU Charge Reallocation of Funding Fee Fee Versus Tax-Based Funding Possible Stormwater Utility Impacts on Selected Properties i

4 EXECUTIVE SUMMARY

5 Executive Summary EXECUTIVE SUMMARY The City of Lake Mills currently owns and maintains over 40 miles of streets, 15 miles of storm sewer, more than 700 drainage structures such as inlets and manholes, and 1 detention basin. Much of the existing drainage system is over 30 years old and in need of repair. In addition, increasing emphasis by the United States Environmental Protection Agency (EPA) and Wisconsin Department of Natural Resources (DNR) on impacts of stormwater runoff-borne pollutants on waters of the state has increased, and will likely continue to increase, local administrative and construction costs. A possible means of funding needed repairs to the City s stormwater management system is through creation of a stormwater utility. A stormwater utility is a method of collecting revenue for stormwater management system improvements under which property owners are charged a user fee based on the amount of stormwater produced on their property, typically based on the amount of impervious (e.g, pavement and rooftops) present. Stormwater utilities have become an increasingly popular means of funding stormwater management improvements throughout Wisconsin and the United States. The fee structure for a stormwater utility is typically based on the amount of impervious area on a parcel of land. A large commercial parcel, which may be 80 to 90 percent impervious, produces a larger amount of stormwater runoff than a residential parcel of equal area, which may be only 30 to 40 percent impervious. With a stormwater utility, the commercial property owner pays a proportionally higher fee than a residential property owner because the impact of his land use on the stormwater system is greater than that of the residential property owner. Therefore, a commercial establishment having eight times the amount of impervious area of a typical residential property would pay a user fee eight times higher than that of a residential property owner. Anticipated responsibilities of the stormwater utility would include 1. Funding and administration of stormwater management operation and maintenance activities. Activities include cleaning and routine repair of ditches, detention basins, storm sewers, catch basins, manholes, streambanks and associated facilities, street sweeping, leaf and brush collection, and construction of stormwater treatment, detention, and conveyance facilities serving a public purpose. 2. Development, implementation, and enforcement of programs and practices necessary for compliance with EPA and DNR nonpoint source pollution control rules and local stormwater management and erosion control ordinances. 3. Responding to customer billing and service inquiries. This study, funded largely by an Urban Nonpoint Source and Stormwater Planning Grant (UNPS&SW) from the DNR, provides the City with a general overview of current stormwater management practices and funding in Lake Mills, background information on stormwater utilities Prepared by Strand Associates, Inc. ES-1 MKS:pll\R:\Documents\Reports\Archive\2007\Lake Mills\SW Utility Feasibility Study mks.Apr\ES.doc

6 Executive Summary and other funding alternatives, estimates of impervious areas by land class in the City, identification of a potential stormwater utility rate structure, and an evaluation of potential impacts of stormwater utility formation on select properties. Presently, the City funds stormwater management system maintenance and capital improvements through property taxes. Under the current system, taxable property value is the sole factor that determines a property owner s contribution to the stormwater management program costs. In the 2006 budget, we have estimated that approximately $130,000 of the total $2,999,438 property tax levy, or 4.3 percent, was used for funding of stormwater management program. Based on this percentage, approximately $0.33 of the $7.60 per $1,000 property tax assessment was used for stormwater management system funding. Therefore, a property having an assessed value of $100,000 currently contributed approximately $33.00 annually to funding of the stormwater management program. Under the current property tax-based funding system, tax-exempt properties do not contribute to stormwater management program funding. Results of the Impervious Area Analysis completed for this study indicate that of the taxable area included in the City s parcel database, residential uses comprise approximately 41 percent of the impervious area. Nonresidential uses such as commercial, manufacturing, and office space comprise approximately 39 percent of the impervious area. The remaining 20 percent of the impervious area is estimated to be on tax-exempt parcels. Therefore, under the assumption that the amount of stormwater runoff is proportional to the amount of impervious area on a property, residential properties currently pay a higher relative percentage of the cost of stormwater management than would be warranted based on the relative amount of runoff coming from this land class. Tax-exempt parcels, which currently do not contribute to the City s stormwater management fund, contribute as much as 20 percent of the stormwater runoff. The proposed stormwater utility rate structure is based on a parameter known as an Equivalent Runoff Unit (ERU). One ERU is defined as the average square footage of impervious area for a residential parcel. The impervious area analysis estimated that in Lake Mills, one ERU is equivalent to approximately 3,600 square feet (rounded) of impervious area, which is the basis for the stormwater utility rate structure. The rate for each ERU is determined by dividing the total revenue that must be generated for the stormwater program by the total number of ERUs within the utility district. The estimated total number of ERUs based on the impervious area analysis, excluding potential future credits, is 4,033 ERUs. Based on 4,033 ERUs, the user fee necessary to support the 2006 stormwater management budget of $130,000 would be approximately $ This means the annual stormwater management fee for a typical residential user (one ERU) would be $32.00/year or $2.67 per month. A property assigned 10 ERUs (36,000 square feet of impervious area) would pay $320.00/year or $26.70 per month. Should the City choose to move forward in establishment of a stormwater utility, we recommend inclusion of the following features: Prepared by Strand Associates, Inc. ES-2 MKS:pll\R:\Documents\Reports\Archive\2007\Lake Mills\SW Utility Feasibility Study mks.Apr\ES.doc

7 Executive Summary 1. The City should model the rate structure after the rate structure agreement reached between the City of Eau Claire and the Public Service Commission (PSC) in resolving a complaint by the Plainwell Tissue Corporation. To date, the City of Eau Claire stormwater utility is the only rate structure that has been examined by the PSC. The fact that the rate structure agreement has been approved by the PSC lends credibility to its fairness. 2. The City should provide stormwater utility credits to property owners implementing practices that reduce development impacts on City stormwater management costs. A practice such as providing stormwater detention to address a downstream flooding issue would be valid criteria for granting a credit because it could reduce future City infrastructure costs associated with downstream drainage improvements. A written credit policy should be developed during the implementation stage of the utility. Prepared by Strand Associates, Inc. ES-3 MKS:pll\R:\Documents\Reports\Archive\2007\Lake Mills\SW Utility Feasibility Study mks.Apr\ES.doc

8 SECTION 1 INTRODUCTION

9 Section 1 Introduction 1.01 INTRODUCTION The City of Lake Mills currently owns and maintains over 40 miles of streets, 15 miles of storm sewer, more than 700 drainage structures such as inlets and manholes, and 1 detention basin. Much of the existing drainage system is over 30 years old and in need of repair. In addition, increasing emphasis by the United States Environmental Protection Agency (EPA) and Wisconsin Department of Natural Resources (DNR) on impacts of stormwater runoff-borne pollutants on waters of the state has increased, and will likely continue to increase, local administrative and construction costs. Currently, the costs of expansion, operation, and maintenance of the City s stormwater management program are paid for by property taxes through the General Fund. Increasing pressures on the General Fund caused by rising municipal costs and reduced revenues from the State of Wisconsin may make the General Fund a less reliable source for stormwater management funding. One possible means of addressing stormwater management funding needs without placing an additional burden on property taxes is formation of a stormwater utility. A stormwater utility is a utility formed for the purpose of managing stormwater and imposing user charges for cost recovery. Unlike property tax funding, user charges under a stormwater utility are established in proportion to the relative amount of stormwater runoff generated by an individual property. The purpose of this report is to provide the following information toward evaluation of stormwater utility formation in Lake Mills: 1. A general overview of current stormwater management practices and funding in Lake Mills. 2. Background information on Stormwater Utilities and other funding alternatives. 3. Results of an Impervious Area Analysis of Lake Mills and estimation of Equivalent Runoff Units. 4. Identification of possible Stormwater Utility responsibilities. 5. Identification of a possible User Fee Rate structure based on the current City budget. 6. Evaluation of potential impacts on select properties. This study is partially funded by the DNR under the Urban Nonpoint Source and Stormwater Planning Grant (UNPS&SW) program. Prepared by Strand Associates, Inc. 1-1 MKS:pll\R:\Documents\Reports\Archive\2007\Lake Mills\SW Utility Feasibility Study mks.Apr\S1.doc

10 Section 1 Introduction 1.02 STORMWATER MANAGEMENT ACTIVITIES The City of Lake Mills owns and maintains a drainage system consisting of inlets, catch basins, manholes, storm sewers, ditches, detention basins, and associated appurtenances. The drainage system ultimately discharges to Rock Lake or Rock Creek either directly through storm sewer outlets or indirectly via grassed ditches, swales, and wetlands. In recent years, the City has required construction of detention basins in new developments to minimize increases in stormwater runoff associated with increasing impervious areas. The City currently owns and maintains one stormwater detention basin. The Department of Public Works is responsible for periodic mowing, debris collection, and other maintenance activities associated with this basin. Other detention basins are typically maintained by private business owners or homeowner s associations. Stormwater management-related activities routinely performed by the Department of Public Works include inlet and storm sewer cleaning and reactive operations such as storm sewer catch basin and manhole repair. Each year additional storm sewers, catch basins, inlets, and manholes are constructed with a number of these requiring additional and continued inspections to ensure effective operation. Currently, the public works department maintains over 15 miles of storm sewer ranging in diameter from 10 to 68 inches and approximately 694 storm sewer structures, which includes 184 manholes and 510 storm inlets. Street sweeping and other routine street maintenance activities are also performed by the Department of Public Works. While historically performed for aesthetic reasons, street sweeping also serves an important function in collecting sediment and other pollutants before reaching local waterways. Lake Mills currently has approximately 40 miles of paved streets that are swept at least once every two weeks. A principal responsibility of the Department of Public Works includes administering and enforcing the City s Stormwater Management and Erosion Control Ordinances. This includes reviewing Stormwater Management and Erosion Control Plans for new site developments and performing field reviews to verify conformance with plans. City costs associated with these activities typically exceed revenue collected through permit fees. This cost differential is currently borne by general fund expenditures. Prepared by Strand Associates, Inc. 1-2 MKS:pll\R:\Documents\Reports\Archive\2007\Lake Mills\SW Utility Feasibility Study mks.Apr\S1.doc

11 Section 1 Introduction 1.03 CURRENT STORMWATER MANAGEMENT EXPENDITURES Table summarizes the City s stormwater management expenditures. Stormwater management expenditures include budgetary impacts from annual operations and maintenance tasks such as storm sewer maintenance, street cleaning, and related items. Expenditures also include debt service impacts stemming from capital improvements. Item 2006 Budget General Fund Equipment/Maintenance $ 5,000 Leaf/Brush Collection 8,000 Street Sweeping 31,000 Dam Operation/Maintenance 2,000 Storm Sewer Maintenance 6,000 Subtotal (General Fund) $52,000 Presently, the City funds stormwater management system maintenance and capital improvements through property taxes. Under the current system, taxable property value is the sole factor determining a property owner s contribution to the City s stormwater management program costs. In the 2006 budget, Capital Projects Budget Capital Improvements and Planning 71,000 Administration 7,000 Total $130,000 Table Stormwater Management Program Expenditures approximately $130,000 of the total $2,999,438 property tax levy, or 4.3 percent, was used for funding of stormwater management system maintenance. Based on this percentage, approximately $0.33 of the $7.60 per $1,000 property tax assessment is used for stormwater management system funding. Therefore, a property having an assessed value of $100,000 currently contributes approximately $33.00 annually to funding of the stormwater management program. The current contribution of the commercial, industrial, residential, and multifamily residential sectors to stormwater management system funding, based on assessed values, is summarized in Table Under the current property tax-based funding system, taxexempt properties do not contribute to stormwater management program funding. Real Estate Class Total Assessed Value Percent of Total Stormwater Contribution Residential $ 304,466, % $ 100,643 Commercial 64,712, % 21,391 Manufacturing 14,886, % 4,921 Tax Exempt (City) % 0 Tax Exempt (Other) % 0 Agricultural 95, % 32 Undeveloped 39, % 13 AG Forest % 4 Forest 1, % 0 Other 199, % 66 Personal Property 8,862, % 2,929 Total $ 393,276,691 $ 130,000 Table Current Estimated Stormwater Funding Contributions (Budget 2006) Prepared by Strand Associates, Inc. 1-3 MKS:pll\R:\Documents\Reports\Archive\2007\Lake Mills\SW Utility Feasibility Study mks.Apr\S1.doc

12 Section 1 Introduction 1.04 ABBREVIATIONS AND ACRONYMS APWA BMPs CWFP DNR EIF EPA ERU GIS PSC NAFSMA O&M STP TEA-21 TIF TRM UNPS&SW American Public Works Association best management practices Clean Water Fund Program Department of Natural Resources Environmental Improvement Fund United States Environmental Protection Agency equivalent runoff units geographical information systems Public Service Commission National Association of Flood and Stormwater Management Agencies operation and maintenance Surface Transportation Program Transportation Equity Act for the 21st Century tax incremental financing targeted runoff management Urban Nonpoint Source and Stormwater Planning Grant Prepared by Strand Associates, Inc. 1-4 MKS:pll\R:\Documents\Reports\Archive\2007\Lake Mills\SW Utility Feasibility Study mks.Apr\S1.doc

13 SECTION 2 BACKGROUND INFORMATION

14 Section 2 Background Information 2.01 STORMWATER UTILITIES BACKGROUND INFORMATION A stormwater utility is a method of collecting revenue for stormwater management system improvements under which property owners are charged a user fee based on the amount of stormwater produced on their property. Stormwater utilities have become increasingly popular throughout the country in recent years. Major cities such as Seattle, San Diego, Cincinnati, Dallas, Sacramento, Miami, St. Paul, and many others currently fund their stormwater management programs through stormwater utilities. A 1996 study by The National Association of Flood and Stormwater Management Agencies (NAFSMA) estimated that 38 percent of stormwater management agencies across the country funded their programs through stormwater utilities. This number is likely higher now. The estimated average annual revenue was $7.6 million, with an average service population of 690,000. A recent survey by the Wisconsin Chapter of the American Public Works Association (APWA 2004 Update) documented 25 stormwater utilities in Wisconsin including municipalities such as Milwaukee, Madison, Sun Prairie, and West Allis. We estimate the actual number in Wisconsin is somewhat higher most likely as high as 40 municipalities. Annual residential rates in Wisconsin range from a low of $12 per year in Lake Delton to a high of $96 in Garner s Creek. The fee structure for a stormwater utility is typically based on the amount of impervious area on a parcel of land. A large commercial parcel, which may be 80 to 90 percent impervious, produces a larger amount of stormwater runoff than a residential parcel of equal area, which may be only 30 to 40 percent impervious. With a stormwater utility, the commercial property owner pays a proportionally higher fee than a residential property owner because the impact of his land use on the stormwater system is greater than that of the residential property owner. Therefore, a commercial establishment having eight times the amount of impervious area of a typical residential property would pay a user fee eight times higher than that of a residential property owner. Benefits of a stormwater utility include the following: 1. A stormwater utility more equitably allocates stormwater system costs to property owners than does the present property tax-based system. Under a property tax-based system, an individual property owner s contribution is based on property value alone. A stormwater utility will allocate costs based on estimated amounts of runoff and, therefore, impacts to the city drainage system. Another benefit of creating a stormwater utility is that it would reduce the need for increasing property taxes or annual general fund borrowing to finance future stormwater management system improvements. 2. A stormwater utility increases the number of properties contributing to funding of the stormwater management system. Under a property tax-based system, a large tax exempt stormwater runoff producer such as a hospital may not contribute to the cost of Prepared by Strand Associates, Inc. 2-1 MKS:pll\R:\Documents\Reports\Archive\2007\Lake Mills\SW Utility Feasibility Study mks.Apr\S2.doc

15 Section 2 Background Information constructing or maintaining a stormwater management system. Under a stormwater utility system, costs from such sites could be recovered through the user fee. 3. A stormwater utility provides a dedicated source for funding stormwater management improvements. Development and implementation of a stormwater utility typically require the following steps: 1. Educate administration, elected officials, and the public. This may involve formation of a steering committee consisting of various sectors of the public, mailings to homeowners and businesses, and public meetings. 2. Develop a stormwater management plan to estimate costs and revenue needs to be recovered through the stormwater utility. The stormwater plan should identify short-term and long-term priorities and establish a preliminary short-term budget (1 to 2 years). 3. Develop a rate structure. This will require the following information: a. Land use identification, estimation of acreage under each land use, and determination of the number of parcels under each land use. This information can be gathered through use of the City s geographic information systems (GIS). b. Determination of appropriate factors to apply to different land use categories. This is based on hydrologic characteristics of each land use category. c. Revenue needs, as determined in the stormwater management plan. d. The relationship between estimated amounts of runoff per parcel to parcel charges. There are a number of alternative methods to assess these charges. The most common method is based on Equivalent Runoff Units (ERUs). ERUs represent runoff from a parcel. These units calculate and levy stormwater charges by multiplying a rate factor by a parcel area. A common application is to establish a typical single-family residential lot as having one ERU. The ERUs assigned to a land use of a different type are based on the amount of stormwater runoff produced in comparison with a typical single-family residential site. In Appleton, Wisconsin, for instance, a typical single-family home is considered to have, on average, 2,368 square feet of impervious area and is assigned one ERU. The total monthly charge is $5.90 per ERU, so a typical homeowner will pay $5.90 per month, or $71 per year. An office building having an impervious area of 18,000 square feet would be assigned 7.6 ERUs (18,000/2,368 = 7.6). Therefore, the monthly charge would be $5.90 x 7.6 = $44.84 per month. Prepared by Strand Associates, Inc. 2-2 MKS:pll\R:\Documents\Reports\Archive\2007\Lake Mills\SW Utility Feasibility Study mks.Apr\S2.doc

16 Section 2 Background Information 4. Prepare a stormwater utility and user charge ordinance. This ordinance establishes the legal authority for the utility and establishes criteria in determining the user charge. 5. Determine how property owners will be billed. Most municipalities include the stormwater user charge on monthly utility bills. Other options include developing a separate billing statement or inclusion on property tax bills OTHER FUNDING OPTIONS A. Property Tax Stormwater management system operation and maintenance and improvement costs in Lake Mills have historically been funded by property taxes. Property taxes are paid into the City s general fund that is also used for other public works improvements, public safety, and other related programs. There is often a great deal of competition with other programs for stormwater management system funding. As a result, stormwater management improvements are typically given a low priority, unless the City is reacting to a recent storm event or regulatory requirements. Property taxes are based exclusively on assessed property value. The City s cost of stormwater service to individual properties is typically more related to physical characteristics of the property served than to the assessed value of the property. Therefore, in many cases, property taxes may not be an equitable means of recovering stormwater management system costs. B. Fees Fees are another common means of funding stormwater management improvements. Fees are charges for services rendered. Many municipalities recover costs of constructing, designing, reviewing, and/or inspecting new developments through fees assessed to developers. Impact fees and special assessments transfer the cost of infrastructure improvements needed for private development directly to developers or property owners. User fees recover costs over the life of a project. An increasingly common type of user fee related to stormwater management is a stormwater utility. C. Tax Incremental Financing (TIF) TIF captures the projected increase in property tax revenue created by developing an area and uses that increase to assist in paying for development and redevelopment projects. This funding makes it possible to go forward with projects that otherwise would not be built. Upon creation of a development or redevelopment project area or district, the assessor will establish the baseassessed value of that area or district. Each subsequent year, the assessor will certify the current assessed value of the property in the development or redevelopment project area or district. The difference between the amount of regular levy property taxes on the current assessed value and Prepared by Strand Associates, Inc. 2-3 MKS:pll\R:\Documents\Reports\Archive\2007\Lake Mills\SW Utility Feasibility Study mks.Apr\S2.doc

17 Section 2 Background Information the amount of regular levy property taxes on the base-assessed value is the tax increment. Regular levy property taxes on the base-assessed value of the property will continue to be allocated to the appropriate local taxing bodies. The tax increment will be deposited in a TIF fund for use on projects approved for the project area or district. Typically, stormwater management projects inside or outside of the TIF that will improve the value of the property are eligible for funding under a TIF. Section of the Wisconsin State Statutes identifies costs potentially eligible for TIF funding. E. Bonds Large capital improvement projects such as major storm sewers or detention facilities may be funded through bonds or grants. Bonds are a mechanism to borrow capital for a project and distribute repayment over the life span of the project. A popular local bonding program is the Clean Water Fund Program (CWFP). This is one of the subsidized loan programs included in the DNR Environmental Improvement Fund (EIF). The CWFP provides loans to municipalities for wastewater treatment and urban stormwater projects. This program has historically been used extensively for wastewater treatment plant construction. Recent program modifications allow funds to be used for stormwater management improvements. Most CWFP projects receive a subsidized interest rate of 55 percent, 65 percent, or 70 percent of the EIF market interest rate. CWFP wastewater projects that meet certain criteria may be eligible to receive Hardship Financial Assistance, which may be in the form of a lower interest rate loan or include a grant. F. Grants 1. TRM/Urban Nonpoint (Note: Information in this Section is copied from the DNR Web Site) Financial assistance for local pollution-control efforts is available through various DNR loan and grant programs, including the Targeted Runoff Management (TRM) and Urban Nonpoint Source & Storm Water Management (UNPS&SW) programs. TRM grants are provided to control polluted runoff from both urban and rural sites. The grants are targeted at high-priority resource problems. Projects funded by TRM grants are site-specific and serve areas generally smaller in size than a subwatershed. The grant period is 2 years, with a possible 1-year extension. The maximum cost-share rate available to TRM grant recipients is 70 percent of eligible costs, with the total of state funding not to exceed $150,000. Prepared by Strand Associates, Inc. 2-4 MKS:pll\R:\Documents\Reports\Archive\2007\Lake Mills\SW Utility Feasibility Study mks.Apr\S2.doc

18 Section 2 Background Information TRM grants can fund the construction of rural and urban best management practices (BMPs). For the first time this year, TRM grants can also fund design of BMPs as part of a construction project. Most work may be reimbursed only when done during the grant period. There are two exceptions: land acquisition and design completed prior to the grant can be reimbursed, provided the design and parcel appraisal are approved by DNR regional staff and the construction project is selected for funding. Some examples of eligible BMPs include stream bank protection projects, wetland construction, detention ponds, some cropland protection, and livestock waste management practices. These and other practices eligible for funding are listed in ch. NR 153 and s. NR , Wis. Adm. Code. UNPS&SW grant funds are used to control polluted runoff in urban project areas. Funds are awarded for either planning or construction projects. The grant period is 2 years with a possible 1-year extension. Projects funded by these grants are site-specific, serve areas generally smaller in size than a subwatershed, and targeted to address high-priority problems. An urban project area must meet one of these criteria: (1) has a population density of at least 1,000 people per square mile, (2) has a commercial land use, (3) is the nonpermitted portion of a privately owned industrial site, or (4) is a municipally owned industrial site (regardless of ch. NR 216, Wis. Adm. Code, permit requirements). Governmental units are eligible for a grant even if the governmental unit is covered by a stormwater permit under ch. NR 216, Wis. Adm. Code. a. Planning Grants UNPS&SW planning grants can be used to pay for a variety of technical assistance activities. Eligible activities such as stormwater management planning, related information and education activities, ordinance and utility development and enforcement are cost shared at 70 percent. This year, the cap on the total state share for UNPS&SW planning projects is $85,000. For a technical assistance activity to be eligible for funding under this program, the project must currently be in an urban area or an area projected to be urban within 20 years. b. Construction Grants Eligible UNPS&SW construction grant costs may include such projects as stormwater detention ponds, filtration and infiltration practices, streambank stabilization, and shoreline stabilization. Eligible costs are cost shared at 50 percent up to a maximum of $150,000. Design costs are also eligible as part of the total project costs and can be reimbursed at 50 percent. Design costs can be retroactively reimbursed provided the design is approved by the DNR regional staff and the construction project is selected for funding. Construction projects involving land acquisition and permanent easements can be awarded up to an additional $50,000 in cost-share funds (50 percent cost-share rate). Land acquisition can be retroactively reimbursed provided the parcel appraisal Prepared by Strand Associates, Inc. 2-5 MKS:pll\R:\Documents\Reports\Archive\2007\Lake Mills\SW Utility Feasibility Study mks.Apr\S2.doc

19 Section 2 Background Information is approved by the DNR appraisal reviewers and the construction project is selected for funding. 4. Transportation Equity Act The Transportation Equity Act for the 21st Century (TEA-21) funds numerous transportation programs, such as the Surface Transportation Program (STP) and the National Highway System, to improve the nation's transportation infrastructure, enhance economic growth, and protect the environment. States may spend up to 20 percent of their STP dollars for environmental restoration and pollution abatement projects including the construction of stormwater treatment systems. Additionally, each state sets aside 10 percent of STP funds for transportation enhancement projects, which can include acquisition of conservation and scenic easements, wetland mitigation, and pollution abatement as well as scenic beautification, pedestrian and bicycle trails, archaeological planning, and historic preservation. These varied project types can be used to protect source water areas during construction of transportation corridors. Prepared by Strand Associates, Inc. 2-6 MKS:pll\R:\Documents\Reports\Archive\2007\Lake Mills\SW Utility Feasibility Study mks.Apr\S2.doc

20 SECTION 3 ESTIMATION OF ERUS AND RATES

21 Section 3 Estimation of ERUs and Rates 3.01 IMPERVIOUS AREA ANALYSIS AND EQUIVALENT RUNOFF UNIT ESTIMATE The goal of this analysis was to estimate the amount of impervious area present on residential and nonresidential parcels to provide a basis for establishing potential user fee rates. A. Method of Measurement and Source of Data The following data, provided by Jefferson County and the City of Lake Mills, was used to estimate impervious areas: 1. Parcel mapping showing parcel boundaries and parcel numbers (revised 2006). 2. Six-inch resolution digital orthophotos dated The 2006 parcel database from the Assessor s Office. This database contains the parcel numbers, owner, assessed values, parcel areas, address, zoning, and land use class. The assessor s parcel database was the primary source of baseline property information. The database was sorted by Land Class and Land Use Description into five categories (residential, commercial, manufacturing, multifamily residential, and tax exempt and other) using Microsoft Access, a database management program. Work within each category referenced the parcel number as the primary key. Subcategories were also included under residential and tax exempt classes. Residential subcategories included single family, duplex/two-flat, multiple/four-plex, multiple dwelling, mobile home, and condominium/townhouse. Tax-exempt subcategories included city-owned, church-owned, countyowned, state-owned, and school district. In instances where multiple parcels were found to be associated with a single address and property owner, individual parcels were grouped and summed under that address. Individual parcels were located by superimposing the parcel map onto the orthophotos using ArcGIS software. The impervious area (including parking lots, driveways, and other paved areas, rooftops, and compacted gravel areas) on individual parcels was digitized based on visual inspection of the orthophotos. The calculated impervious area was entered into an Access database using the parcel number as the primary key. Some adjustments to the impervious parcel areas were made based on field observations and/or surveying. B. Residential Parcel Analysis A representative sample comprised of 77 single-family residential parcels of the total 1,810 singlefamily residential parcels in the assessor s database was analyzed to estimate the average impervious area for a typical residential parcel. The estimated average impervious area resulting from analysis of this sample was approximately 3,600 square feet. The stormwater utility rate structure is based on ERUs. One ERU is defined as the average square footage of impervious area for a residential parcel. Therefore, the land use analysis estimated that one Prepared by Strand Associates, Inc. 3-1 MKS:pll\R:\Documents\Reports\Archive\2007\Lake Mills\SW Utility Feasibility Study mks.Apr\S3.doc

22 Section 3 Estimation of ERUs and Rates ERU is equivalent to approximately 3,600 square feet (rounded) of impervious area, which is the basis for the stormwater utility rate structure. For comparative purposes, one ERU is defined as 3,000 square feet of impervious surface in Eau Claire s stormwater utility ordinance and 2,368 square feet in Appleton s stormwater utility ordinance. C. Nonresidential Parcel Analysis Nonresidential parcels in the assessor s database were analyzed to estimate the impervious area for each parcel. For this analysis, a total of 266 parcels were analyzed. The nonresidential analysis included all land use categories except those listed as under residential (above) and the following: 1. Agricultural 2. Farmstead 3. Vacant 4. Right-of-Way To validate measurement results, approximately 1 percent of the measured parcels in each land use category was spot-checked. Spot checks included independent visual inspection of the impervious areas digitized in ArcGIS. Also, hard copies of the aerial mapping for selected areas were plotted, and these areas were manually measured with either a scale or planimeter. The impervious areas manually spot-checked agreed within 10 percent of the impervious areas measured in GIS. Results of the Impervious Area Analysis are summarized in Table Table indicates that of the taxable area included in the City s parcel database, residential uses comprise approximately 41 percent of the impervious area. Nonresidential uses such as commercial, manufacturing, and office space comprise approximately 39 percent of the impervious area. The remaining 20 percent of the impervious area is estimated to be on tax-exempt parcels. A breakdown of estimated ERUs for various land classes in Lake Mills is also included in Table Prepared by Strand Associates, Inc. 3-2 MKS:pll\R:\Documents\Reports\Archive\2007\Lake Mills\SW Utility Feasibility Study mks.Apr\S3.doc

23 Section 3 Estimation of ERUs and Rates Residential Land Use Class Number of Parcels Parcel Area (acres) Total Impervious Area (sq ft) Average Impervious Area (sq ft) ERUs Percent of Total ERUs Singe-family residential 1, ,164 3,600 1, % Mobile Home , , % Residential Subtotal 1, , ,016 1, % Commercial ,308,866 19, % Manufacturing ,096 49, % Industrial ,280,942 99, % Tax Exempt Other City-Owned ,039,290 30, % State-Owned ,634 55, % County-Owned % Other Exempt ,712,003 50, % Tax Exempt Subtotal ,973, , % Agricultural % Unknown % Total 2,172 2, ,456, ,327 4, % Table Estimated Impervious Area and ERUs 3.02 POTENTIAL USER FEES AND RATE STRUCTURE A. Stormwater Utility Service Area and Responsibilities The projected stormwater utility service area is primarily the area within the Lake Mills city limits. In addition, subdivisions abutting the city limits that drain into the City involving City maintenance activities may be added pending development of an intermunicipal agreement. The utility has the following primary goals: 1. Provide a more equitable means of funding the City s stormwater management program. 2. Provide nonproperty tax-based revenues for the operation and maintenance of the City s stormwater management program. 3. Provide a mechanism to fund the City s future stormwater needs, including new EPA requirements and remedial storm sewer improvements. Prepared by Strand Associates, Inc. 3-3 MKS:pll\R:\Documents\Reports\Archive\2007\Lake Mills\SW Utility Feasibility Study mks.Apr\S3.doc

24 Section 3 Estimation of ERUs and Rates The following are the anticipated responsibilities of the stormwater utility: 1. Fund and administer stormwater management operation and maintenance activities. Activities include cleaning and routine repair of ditches, detention basins, storm sewers, catch basins, manholes, streambanks and associated facilities, street sweeping, leaf and brush collection, and construction of stormwater treatment, detention, and conveyance facilities serving a public purpose. 2. Develop, implement, and enforce programs and practices necessary for compliance with EPA and DNR nonpoint source pollution control rules and local stormwater management and erosion control ordinances. 3. Respond to customer billing and service inquiries. Prior to implementation of the stormwater utility, it is recommended the City develop an organizational structure identifying how the utility will be staffed and governed. It is anticipated that the Lake Mills City Council would be the governing authority over the stormwater utility. In addition, it is currently anticipated that the stormwater utility would be primarily an organizational entity utilizing existing City staff, equipment, and facilities. B. Anticipated Stormwater Management Budget For purposes of this analysis, the existing City stormwater management budget will be utilized. Prior to implementation of a stormwater utility, the City should evaluate potential costs for inclusion in the utility with consideration of future construction and stormwater management program needs. C. Recommended Rate Structure Four primary factors should be considered in developing the Lake Mills stormwater utility rate structure: 1. The rate structure must generate adequate revenue to fund the City s stormwater management program. 2. The rate structure must equitably charge a customer based on the impact the property owned by the customer has on the actual cost of the City s stormwater management program costs. 3. The rate structure must be understandable to the public. 4. The rate structure must be legally defensible. We recommend modeling Lake Mill s rate structure after the rate structure agreement reached between the City of Eau Claire and the Public Service Commission (PSC) in resolving a complaint by the Plainwell Tissue Corporation. To date, the City of Eau Claire stormwater utility is the only rate structure Prepared by Strand Associates, Inc. 3-4 MKS:pll\R:\Documents\Reports\Archive\2007\Lake Mills\SW Utility Feasibility Study mks.Apr\S3.doc

25 Section 3 Estimation of ERUs and Rates that has been examined by the PSC. The fact that the rate structure agreement has been approved by the PSC lends credibility to its fairness. Proposed features of the recommended rate structure are described below. 1. Stormwater service charges are based on Equivalent Runoff Units (ERU). One ERU equals the average impervious area on a typical residential property. Single-family residential parcels are assigned one ERU. The fee for nonresidential parcels is based on the number of ERUs. The number of ERUs is estimated by dividing the total estimated impervious area on the parcel by the typical residential impervious area. Appropriate credits should be provided to nonresidential parcels that do not fully utilize City stormwater management facilities. 2. The annual stormwater user fee for each ERU is based on the total annual stormwater utility costs divided by the total number of ERUs assigned to all properties in the Stormwater Utility Service Area. 3. The stormwater user fee should include three distinct components: a. Base Component: The base component includes the stormwater utility s estimated annual administrative and management costs, water quality costs, and other miscellaneous costs. Costs associated with the new EPA requirements are included in the base component. b. Operation and Maintenance (O&M) Component: The O&M component includes the utility s estimated annual operation and maintenance costs for the City s stormwater management system, including storm sewer and detention basin maintenance, street sweeping, and so on. c. Capital and Debt Service Component: This includes capital costs and debt service payments for the City s stormwater management system. This structure parallels the structure approved by the PSC for the City of Eau Claire in the Plainwell Tissue Corporation complaint. Such a structure would enable the City to recover citywide costs such as EPA compliance and utility administrative costs from all customers. Fees directly attributable to maintenance of the existing stormwater management system could be reduced if all or a portion of a customer s property does not utilize the City s stormwater management system. D. Credits and Exemptions The PSC ruling on the City of Eau Claire versus Plainwell Tissue Corporation complaint concludes that consideration must be given to private investment that aids in controlling storm and surface water quality and quantity when establishing user fee rates. The ruling states that...where a nonresidential resident has significant surface area that is not being directly served by City-owned infrastructure, the Prepared by Strand Associates, Inc. 3-5 MKS:pll\R:\Documents\Reports\Archive\2007\Lake Mills\SW Utility Feasibility Study mks.Apr\S3.doc

26 Section 3 Estimation of ERUs and Rates City must have in place a user charge system that makes reasonable provision to address this circumstance. With consideration of this ruling, we recommend incorporating a rate structure that allows for reduction of a portion of the stormwater utility fee to nonresidential customers having property that drains directly into a major waterway and does not use a City-owned facility. Based on this ruling, the rate structure should allow waiver, upon customer request, of the Operation and Maintenance and/or the Debt Service component costs, provided: 1. The discharge is direct and not through any form of conveyance system owned or operated by the stormwater utility. 2. The drainage is not in violation of any environmental code or federal, state, or local surface water drainage requirements. It is assumed that direct discharge to a facility or drainageway that does not ultimately discharge to a facility owned by the City is the only activity that would enable consideration of this reduction. For the purposes of this report, it is estimated that 10 percent of the estimated nonresidential impervious area would meet this criteria allowing reduction of the Operation and Maintenance and Capital and Debt Service charges. The area was estimated by locating nonresidential privately owned parcels on contour mapping that potentially drain away from the City but do not discharge through storm sewers owned or operated by the City. Properties qualifying for a credit would still be responsible for the base component. The projected 2006 cost associated with exempting this percentage of impervious area totals approximately $14,500, which would be built into the overall rate structure and spread out among the remaining properties. Eligibility for a credit will need to be reviewed in detail prior to stormwater utility implementation. In addition, contour and drainage system mapping should be reviewed prior to utility implementation to identify properties that may be affected by this exemption. The City may wish to consider implementing a system of credits for other activities. Some criteria for credits used in other stormwater utilities around the country include property location with respect to outfall, extraordinary practices or activities that benefit the system, practices that reduce the impact of a new development on the drainage system, credits for certain classes of rate payers, and credits for certain classes of property. We recommend that any credit system established by the City relate directly to development impacts on City stormwater management costs. A practice such as providing stormwater detention to address a downstream flooding issue would be valid criteria for granting a credit because it could reduce future City infrastructure costs associated with downstream drainage improvements. We do not recommend allowing credits for land characteristics or practices not associated with stormwater runoff. Examples of this would be credits based on classes of property or classes of rate payers (for example, churches or low-income residents). Exempting classes of rate payers or properties on any basis other than impacts on the system may violate the fundamental basis of the user fee system. Prepared by Strand Associates, Inc. 3-6 MKS:pll\R:\Documents\Reports\Archive\2007\Lake Mills\SW Utility Feasibility Study mks.Apr\S3.doc

27 Section 3 Estimation of ERUs and Rates Prior to implementation of the stormwater utility, the City should develop a written policy documenting the following: 1. What, if any, activities should qualify a customer for a user fee credit? 2. How much credit should be given for selected activities? 3. How should credits be calculated and implemented? E. Estimated User Fee Calculation The stormwater user fee per property is based on assigning one ERU to each residential property and assigning a number of ERUs to each nonresidential property based on the square footage of impervious area. The user fee collected from that property is the established rate per ERU multiplied by the number of ERUs. The rate per ERU is determined by dividing the total revenue that must be generated for the stormwater system by the total number of ERUs within the utility district. The total number of ERUs based on the land use analysis is 4,032 ERUs. Exemptions based on impervious areas not draining to the City s drainage system would reduce the total number of ERUs by approximately 10 percent, or roughly 403 ERUs. Based on 3,629 ERUs, the user fee necessary to support the 2006 stormwater management budget of $130,000 would be approximately $ This means the annual stormwater management fee for a typical residential user (1 ERU) would be $36.00/year or $3.00 per month. Table summarizes the estimated revenue based on a range of ERU costs from $2.08 to $4.50 per month. Monthly ERU Charge Potential Revenue Generated ERUs $2.08 3,629 $90,580 $2.50 3,629 $108,870 $3.00 3,629 $130,644 $3.50 3,629 $152,418 $4.00 3,629 $174,192 $4.50 3,629 $195,966 Table Potential Revenue Per Monthly ERU Charge Prepared by Strand Associates, Inc. 3-7 MKS:pll\R:\Documents\Reports\Archive\2007\Lake Mills\SW Utility Feasibility Study mks.Apr\S3.doc