Sustainable Watershed Finance: Models, Tools, and Tricks

Sustainable Watershed Finance: Models, Tools, and Tricks Environmental Finance Center University of North Carolina (919) 843-4956 jhughes@sog.unc.edu www.efc.sog.unc.edu

Acknowledgements Some of the research used for this presentation was made possible by funding from the US Environmental Protection Agency and the Conservation Trust for North Carolina through a grant from the U.S. Endowment for Forestry and Communities

Objectives Expand understanding of watershed finance options and approaches Expand understanding of institutional and governance models for increased watershed protection cost sharing Provide forum for area practitioners to share perspectives and experiences

Agenda Watershed finance (with focus on Upper Neuse) Legal framework governing cost sharing models Models and Practices in Practice. New and innovative??

Participants 25 Participants 6 from Land trusts 8 from Local government water and stormwater utilities 9 from Other local government 2 Other (regional planning organizations, universities)

My family drinks water that comes from? 1. Falls Lake 2. Lake Michie 3. OWASA reservoirs 4. SGWASA 5. Jordan Lake 6. Town of Hillsborough 7. My well 8. Other 9. No idea 33% 19% 14% 10% 10% 5% 5% 5% Falls Lake Lake Michie OWASA reservoi... SGWASA Jordan Lake Town of Hillsb... 0% My well Other No idea Source: Polling results from 25 workshop participants

If my crazy uncle with his oil leaking jalopy car visits the oil runs into which drinking water source? 1. Falls Lake 2. Lake Michie 3. OWASA reservoirs 4. SGWASA 5. Jordan Lake 6. Town of Hillsborough 7. Other 8. No idea Falls Lake 45% 30% 25% 0% 0% 0% 0% 0% Lake Michie OWASA reservoirs SGWASA Jordan Lake Town of Hillsborough Other No idea Source: Polling results from 25 workshop participants

Which of the following is the best blend of effective, feasible, and efficient methods for improving the quality of the Upper Neuse for drinking water? 1. Land conservation and protection 2. Increased stormwater best management practices 3. Wastewater treatment improvements 4. Improved treatment capabilities at water treatment plant 5. Treatment technologies within water body itself 6. Other 52% 29% 5% 5% Land conservat... Increased stor... Wastewater tre... Improved treat... Treatment tech... 0% 10% Other Source: Polling results from 25 workshop participants

Which of the following is the best blend of effective, feasible, and efficient methods for improving the quality of the Upper Neuse for drinking water? 1. Land conservation and protection 2. Increased best management practices 3. Wastewater treatment improvements 4. Improved treatment capabilities at water treatment plant 5. Treatment technologies within water body itself 6. Other Source: Informal Poll of Utility Staff and Planners Source: Polling results from 25 workshop participants

WATERSHED PROTECTION AND IMPROVEMENT: WHO PAYS AND HOW DO THEY PAY?

State Land Conservation Finance Support Before 2013 Legislative Session Clean Water Management Trust Fund -- non-recurring National Heritage Fund Deed stamp-- earmarked Tax Credit After 2013 Legislative Session Clean Water Management Trust Fund recurring (budget) National Heritage Fund (merged into Clean Water Management Trust Fund (Budget) Deed stamp earmarked Tax Credit (Tax reform bill)

Raw materials for building local government watershed finance system Property taxes Sales taxes Donations/contributions Special assessments (beneficiary driven) Stormwater fees Water utility fees Inter-governmental transfers/grants

What is the most realistic source of revenue for increased watershed protection in Upper Neuse? 1. Federal taxes 2. State taxes 3. Local taxes 4. Water/wastewater fees 5. Stormwater fees 6. Private donations 7. Other Federal taxes 5% State taxes 0% Local taxes 9% Water/wastewat... 36% Stormwater fee... 50% Private donati... 0% 0% Other Source: Polling results from 25 workshop participants

What is the most realistic source of revenue for increased watershed protection in Upper Neuse? 1. Federal taxes 2. State taxes 3. Local taxes 4. Water 5. Wastewater fees 6. Stormwater fees 7. Private donations 8. Other Source: Informal Poll of Utility Staff and Planners Source: Polling results from 25 workshop participants

Voluntary Partnerships: Mills River Watershed: Water Utility Revenueshed Mills River Watershed

Project Activities Revenueshed analysis Revenue Scenario Modeling and Tools Education events Institutional (Cost Sharing) Inventory and Assessment

Residential Non-Residential Wastewater Utility Ave Use kgal (ccf) Ave Bill ($) Ave Use kgal (ccf) Ave Bill ($) Creedmoor 3.1 (4.1) $57.37 22.4 (29.9) $308.20 Durham 4.5 (5.98) $29.45 33.9 (45.31) $176.93 Hillsborough 4.2 (5.6) $35.82 11.9 (15.9) $94.80 Raleigh 3.8 (5.1) $18.44 25.3 (33.8) $80.36 Roxboro 4.3 (5.7) $24.06 16 (21.4) $149.13 SGWASA 3.8 (5.1) $39.30 13.5 (18) $238.12 Wastewater Utility 2012 AFIR 2011 AFIR 2010 AFIR 2009 AFIR 2008 AFIR Creedmoor $1,503,883 $1,599,444 $1,332,659 $925,000 $734,868 Durham $37,280,307 $34,565,548 $36,897,204 $36,219,748 $34,125,084 Hillsborough $3,316,279 $2,756,220 $2,578,288 $2,500,585 $2,365,439 Raleigh $78,948,392 $50,346,462 $41,888,532 $37,425,800 $41,039,649 Roxboro* $5,526,136 $5,189,183 $1,931,433 $1,861,762 $2,095,422 SGWASA No Data No Data No Data No Data No Data *Combined water and wastewater sales

Residential Water Charge Non-Residential Water Utility Ave Use kgal (ccf) Ave Bill ($) Bill / Use ($/kgal) Creedmoor 3.1 (4.1) $39.28 $12.67 Durham** 4.5 (5.98) $20.36 $4.52 Hillsborough 4.2 (5.6) $32.28 $7.69 Orange- Alamance 3.8 (5.1) $33.52 $8.82 Raleigh 3.8 (5.1) $19.36 $5.09 Ave Use kgal (ccf) Ave Bill ($) Bill / Use ($/kgal) 22.4 (29.9) $186.23 $8.31 33.9 (45.31) $134.83 $3.98 11.9 (15.9) $94.50 $7.94 11.3 (15.1) $63.36 $5.61 25.3 (33.8) $105.60 $4.17 Roxboro* 4.3 (5.7) $28.22 $6.56 16 (21.4) $74.63 $4.66 SGWASA 3.8 (5.1) $29.18 $7.68 13.5 (18) $71.19 $5.27 *Utility drinking water source is outside the UNRB **Utility drinking water source is inside and outside the UNRB

Water Utility 2012 AFIR 2011 AFIR 2010 AFIR 2009 AFIR 2008 AFIR Creedmoor $1,355,705 $1,402,434 $1,025,728 $760,000 $677,844 Durham $42,039,495 $40,003,119 $38,044,534 $29,998,148 $23,710,890 Hillsborough $4,050,717 $3,567,033 $3,531,295 $3,444,560 $3,337,612 Raleigh $91,503,590 $69,102,457 $52,061,800 $44,992,359 $53,072,271 Roxboro* $5,526,136 $5,189,183 $2,339,325 $2,479,705 $2,395,748 SGWASA No Data No Data No Data No Data No Data *Combined water and wastewater sales

Stormwater Utility 2012 AFIR 2011 AFIR 2010 AFIR 2009 AFIR Durham $12,556,333 $10,892,409 $9,531,517 $8,686,226 Raleigh $15,520,724 $15,656,170 $13,906,902 $13,690,215 Stormwater Utility Fee Per ERU Average ERU Residential Number Accounts Non-Residential Average ERU Number Accounts 2012 AFIR Reported Revenue Durham $6.28 1.25 46,353 20 5,365 $12,556,333 Raleigh $4.00 1.25 110,124 20 7,814 $15,520,724

Maps, Tools and Analyses Galore: efc.sog.unc.edu

Polluter Pays Principle

Slide provided by Laura Smith, Durham Stormwater

Slide provided by Laura Smith, Durham Stormwater

Slide provided by Laura Smith, Durham Stormwater

Beneficiary Pays Principle Source: Environmental Finance Center, Lauren Patterson

Plan and Process Conservation Plan Stakeholder input Technical Advisory Team GIS-based ID high priority parcels Application Process Land trust -> Review Group -> Raleigh Utility staff -> Budget and Economic Development Committee -> Raleigh City Council Slide Source: Caitlin Burke, CTNC

Initial Funding City of Raleigh from nutrient impact fees 2005, 2006 = $500,000/year 2007, 2010 = $1,000,000/year 2008, 2009 = $1,500,000/year Clean Water Management Trust Fund Landowner donations Slide Source: Caitlin Burke, CTNC

Program Accomplishments Total Projects Closed Raleigh- Funded Projects Closed Raleigh- Funded Projects in Progress # Projects 68 30 10 Total Value $65 million $34 million $3 million Raleigh-Funded Value $3.15 million $3.15 million $1.4 million Miles Stream Protected 64 33 12 Acres Protected 6300 2785 1012 Slide Source: Caitlin Burke, CTNC

Who pays

MODELS FOR SHARING FUNDS

Characteristics of Watershed Improvement/Protection Finance Multiple types of initiatives land protection land bmps installed bmps point source investments Multiple types of actors land trusts, utilities, land owners General fund departments Multiple funding tools Fees contributions, taxes Multiple jurisdictions Geographically diverse Impacters beneficiaries

My past experience with multi-jurisdiction water resource partnerships has been 1. Very positive 2. Generally positive 3. Mixed 4. Generally negative 5. Terrible 14% 48% 33% 5% 0% Very positive Generally positive Mixed Generally negative Terrible Source: Polling results from 25 workshop participants

My past experience with multi-jurisdiction water resource partnerships has been 1. Very positive 2. Generally positive 3. Mixed 4. Generally negative 5. Terrible Source: Informal Poll of Utility Staff and Planners Source: Polling results from 25 workshop participants

Water Improvement Cost Sharing Models Common in NC Water and Sewer Authority Inter-local agreement delegated authority Membership association Inter-local agreement shared resources Third-party non-profit manager

No shortage of examples.. Upper Neuse River Basin Association Upper Neuse Clean Water Initiative Southern Granville Water and Sewer Authority Jordan Lake Partnership Multi-jurisdiction stormwater program/utility agreements Neuse River Compliance Association

What are the challenges to sharing funds? Can funds legally be used for purpose? How are funds transferred? Different views about priority purposes Governance structure for decision making Allocation of perceived benefits Regulatory interaction is it already required, credits

Upper Neuse River Basin Association Cost Sharing City of Creedmoor City of Durham City of Raleigh Durham County Durham County Soil and Water Conservation District Franklin County Granville County Orange County Person County South Granville Water and Sewer Authority Town of Butner Town of Hillsborough Town of Stem Town of Wake Forest Wake County 10% divided equally among all members 50% divided by members based on share of daily average raw water demand from watershed 40% based on percent of land member has of total land in watershed

Models of interest from a far.

Other approaches Birch Bay Watershed and Aquatic Resources Management District Central Arkansas Water Watershed Protection Fee (fee based on meter sized) http://www.carkw.com/customerservice/rates/ Montgomery County, MD Water Quality Protection Fee (State mandated) http://www6.montgomerycountymd.gov/dectmpl.asp?url= /Content/dep/water/wqpc.asp Denis Watershed District ($20/yr watershed protection per meter fee approved by district voters) http://www.denniswater.org/public_documents/denniswat er_webdocs/rates

Other Approaches Connecticut River crowd-funding http://www.cleanwaterfuture.org/ LA County Park and Open Space District Property Assessments http://openspacedistrict.lacounty.info/cms1 _107767.pdf Nebraska Natural Resources Districts, http://nrdnet.org/nrd-guide.php

For More Information Jeff Hughes Environmental Finance Center University of North Carolina (919) 843-4956 jhughes@sog.unc.edu www.efc.sog.unc.edu