User Fee Funded Stormwater Utilities: Benefits and Challenges

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1 User Fee Funded Stormwater Utilities: Benefits and Challenges MWEA/MI-AWWA Joint Expo Infrastructure Financing Seminar Vic Cooperwasser, P.E. February 5, 2013

2 Agenda Water, Sewer and Stormwater Asset Management User Fee Funded Stormwater Utilities: Benefits National User Fee Funded Stormwater Utilities User Fee Funded Stormwater Utilities: Challenges Michigan User Fee Funded Stormwater Utilities Bolt Opinion 2

3 WATER, SEWER AND STORMWATER ASSET MANAGEMENT

4 Water, Sewer and Stormwater Asset Management Asset management ensures that funds are available to rehabilitate and replace assets as needed. Asset management cannot be taken for granted. Asset management has varied through the ages 4

5 Water Asset Management Ephesus, Turkey: 200 AD 5

6 Sewer Asset Management Ephesus, Turkey: 200 AD 6

7 Sewer Asset Management Cuttack, India: Today 7

8 Sewer Asset Management Cuttack, India: Today 8

9 Asset Management Steps Conduct Asset Inventory Perform Condition Assessment Prioritize Improvements Determine Revenue Requirements Establish or Re-set User Fees Implement Improvements Repeat the Cycle 9

10 Stormwater Asset Management 1974: Bellevue, Washington was the first community to implement a user fee funded utility to generate revenue to support its stormwater assets The concept is similar to funding water and sewer assets by user fees 10

11 USER FEE FUNDED STORMWATER UTILITIES: BENEFITS

12 From: Cuyahoga River Fire, 1969

13 To: Grand River Kayaking in Jackson, 2010

14 User Fee Funded Stormwater Utilities: Benefits A user fee funded stormwater utility sustains its stormwater assets through dedicated funds generated in an equitable way Users pay a user fee based on property area 14

15 User Fee Funded Stormwater Utilities: Benefits Fair and equitable Dedicated dollars stable and predictable Costs are spread over a larger customer base (taxable and tax-exempt properties) Encourages green behavior through user fee credits Residential taxpayers generally pay less compared to funding by property taxes 15

16 User Fee Funded Stormwater Utilities: Benefits Charge parcels: In proportion to relative stormwater runoff Regardless of tax-exempt status Like water and sewer user fees Water or sewer user fee = $/gallons used Stormwater user fee = $/property area 16

17 NATIONAL USER FEE FUNDED STORMWATER UTILITIES

18 Over 1,300 User Fee Funded Stormwater Utilities: In 39 States and District of Columbia [Western Kentucky University Survey]

19 User Fee Funded Stormwater Utilities Average national user fee funded stormwater bill for a typical single family residence: $13.50 per quarter 19

20 User Fee Funded Stormwater Utilities, By State [Western Kentucky University Survey] 20

21 User Fee Funded Stormwater Utilities

22 USER FEE FUNDED STORMWATER UTILITIES: CHALLENGES

23 User Fee Funded Stormwater Utility Challenges Engineering: Stormwater requirements Parcel area determination Cost of service rate study Public Information: Brochure Public education Legal: Ordinance Potential Lawsuits 23

24 Engineering: Stormwater Requirements Consolidate current level of services delivered by several departments into a single budget Determine desired level of service to meet stormwater program needs (preferably based on a stormwater master plan and asset management plan) Review capital, replacement, administrative, regulatory and operation and maintenance needs 24

25 Engineering: Parcel Area Determination Analyze GIS database Digitize aerial photography Review property assessor data 25

26 Engineering: User Fee Study Study alternative stormwater user fee models Select a model Input the stormwater management program revenue requirement and parcel area assessment data into the model Calculate estimated user fee 26

27 Stormwater User Fee Models Equivalent Residential Unit (ERU) Intensity of Development (ID) Equivalent Hydraulic Area (EHA) 27

28 All Require Measurement of Impervious Area of Property ID and EHA Also Require Measuring Pervious Area

29 Impervious Area High hydrologic response factors Buildings, roofs, driveways, parking lots and sidewalks Significantly inhibits stormwater from penetrating soil 29

30 Pervious Area Low hydrologic response factors Lawns, fields, and forests Does not significantly inhibit stormwater from penetrating soil 30

31 Equivalent Residential Unit (ERU) Allocates costs based on the impervious area of a typical single family residence (SFR) 31

32 Typical SFR Impervious Area - Basis for ERU Method 32

33 ERU Method Example: 1 ERU = 2,500 square feet of impervious area The Impervious Area of a typical single family residential home is the basis for billing all customers. 33

34 Intensity of Development (ID) Allocates costs based on the percentage of impervious area relative to the property s total area 34

35 ID Method Example: 0 to 20% impervious 21 to 40% impervious 41 to 60% impervious 61 to 80% impervious 81 to 100% impervious Parcels are placed into broad categories of Intensity of Development, from 0 to 100% with categories in between. 35

36 Intensity of Development (ID Method) Property is billed a user fee per square foot applied to the total property area Several user fee per square foot groups User fee per square foot increases as intensity of development increases 36

37 Equivalent Hydraulic Area (EHA) Allocates cost based on combined impact of measured impervious and pervious property areas 37

38 Equivalent Hydraulic Area Method IMPERVIOUS AREA 100 Drops PERVIOUS AREA 100 Drops paved 95 drops flow 5 absorbed Relative Runoff = Paved Area x Pervious Area x drops flow 85 absorbed grassy/ underdeveloped Equivalent Hydraulic Area (EHA) = 0.95 x Impervious Area x Pervious Area 38

39 EHA Method 0.95 x impervious area PLUS 0.15 x pervious area = EHA of property Impervious and pervious areas are measured to develop a number that represents their combined impact on the relative runoff from the property 39

40 User Fee Model Selection Factors Fair and equitable Single family residential user fee options: Single (all pay the same) Tiered (all within tiers pay the same) Individually measured (all are unique) Multi-family, institutional, commercial, industrial: Unique bills based on each property s area Green infrastructure credits Exemptions 40

41 Tiered Residential User Fees 1,000 SF on 0.2 Acre 600 SF on 0.1 Acre 4,000 SF on 2 Acres 41

42 Green Infrastructure Credits On-site detention basin Increased landscaping/vegetation Use of permeable materials Filtering systems, such as filter strips Educational programs Other items that result in a measurable reduction in stormwater runoff or pollutant loadings Prepare credit manual, including credit application forms 42

43 Public Information Establish advisory committee Identify key users and groups: Properties that generate significant runoff Tax-exempt properties Create web site Prepare brochure and presentations Meet with key user groups and media Send each user a mock bill before billing begins 43

44 Legal: Ordinance Legal opinion Adopt and describe user fee model Green infrastructure credits Enforcement Grace period Appeals process 44

45 Legal: Potential Lawsuits Western Kentucky University survey identified 65 legal challenges to date 36 decided in favor of the utility 14 unfavorable decisions 15 decisions pending 45

46 Stormwater Utility Challenges and Outcomes [Western Kentucky University Survey]

47 MICHIGAN USER FEE FUNDED STORMWATER UTILITIES

48 Michigan User Fee Funded Stormwater Utilities 1984: Ann Arbor 1992: Harper Woods 1993: Adrian Saint Clair Shores 1994: Berkley Marquette 1995: Lansing (Rescinded) 1996: Brighton (Billing on hold since 2004) 1997: Chelsea New Baltimore 2011: Jackson 48

49 BOLT OPINION

50 Bolt Opinion December, 1998: Michigan Supreme Court decided Lansing s stormwater utility charge was a tax, not a user fee Created a three-part test to determine if a charge is a tax or a user fee 50

51 Three-Part Bolt User Fee Test 1. Serves a regulatory purpose rather than a revenue raising one 2. Is proportional to the necessary cost of service 3. Users must be able to voluntarily refuse or limit the use of the service 51

52 Impact of Bolt Opinion 1997 to 2010: No new Michigan user fee funded stormwater utilities implemented 2011: Jackson implemented user fee funded stormwater utility and is defending against Bolt legal challenges 52

53 Questions? Vic Cooperwasser, P.E. Senior Project Manager Tetra Tech 710 Avis Drive Ann Arbor, MI