Study Examines Feasibility of City's Stormwater Utility User Fee

The National Pollutant Discharge Elimination System (NPDES) stormwater program is a comprehensive two-phased national program ...

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by Christina Zolezi

The National Pollutant Discharge Elimination System (NPDES) stormwater program is a comprehensive two-phased national program for addressing the non-agricultural sources of stormwater discharges which adversely affect the quality of our nation's waters. The stormwater program uses the NPDES permitting mechanism to require the implementation of controls designed to minimize harmful pollutants from being washed by stormwater runoff into local water bodies. Regulated Municipal Separate Storm Sewer Systems (MS4) municipalities are under federal mandates to meet the terms of the NPDES requirements to reduce stream pollution and flooding within their jurisdictions. During past years, the federal government has requested that municipalities create a separate source of funding to pay for various techniques, or Best Management Practices (BMPs), to reduce stream pollution and flooding. Failure to implement BMPs would result in the city being penalized by the state or federal government.

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Aerial view of the City of Ithaca and surrounding municipalities.
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The City of Ithaca, a small, regulated MS4 in Tompkins County, NY, was arbitrarily selected as a municipality looking to implement a Stormwater Management Program (SMP) that would be funded by a stormwater utility user fee. The City is surrounded by the Town of Ithaca. The City's primary watershed is the Six Mile Creek Watershed. For the past five years the city has been working with several other municipalities and citizens to manage the Six Mile Creek Watershed and several other watersheds in Tompkins County.

The purpose of a stormwater utility user fee is to establish a municipal fund dedicated solely to an SMP. A feasibility study was performed to determine if a stormwater utility user fee would be an equitable, stable, flexible, and enterprise source of funding capable of supporting an SMP that meets the requirements of the NPDES permit. The general components of a Stormwater Management Program include, but are not limited to, program management; engineering and planning; inspection and enforcement; operation and maintenance; and a Capital Improvement Program (CIP).

As part of the feasibility study, the stormwater utility user fee and several alternative stormwater management funding options were evaluated. Alternative funding options include, but are not limited to, general fund, special assessments, bonding, fee-in-lieu-of, capitalization recovery fees, impact fees, developer extension/latecomer fees, and federal and state funding. A comparison of the funding methods was performed to determine the best SMP funding method (see Table).

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The review of the available funding options found that general funds and the stormwater utility user fee have the capability to support the entire SMP. General funds are comprised of revenues generated from taxes, such as property, sales, or income taxes, and are used on a broader scale to support the various programs the community needs. However, a stormwater utility user fee is based upon stormwater runoff generation and the amount of impervious area that is present on the property rather than property value. The properties that generate less stormwater will pay less, whereas the properties that generate more stormwater will pay more. Also, properties that are tax-exempt would not be exempt from the stormwater utility user fee.

Many communities have used a combination of the general funds and stormwater utility user fee to bridge the transition of switching from general funds to the stormwater utility user fee funding the SMP. This period of transition typically varies from one to five years. The benefit of using this combination is that it maintains a partial general revenue contribution for an SMP while initiating the user fee system to improve the ability to address problems immediately. Also, the overall cost impact on property owners is usually somewhat less if partial general fund support is maintained.

The amount of impervious area present at a site is easily quantifiable and rate polices developed for an SMP focus on the amount of impervious area present on any given parcel in the City to determine a user fee structure for allocating costs to customers. A preliminary database was developed based upon the information provided in the City's GIS files. There were approximately 5,590 records overall. All relevant information from each of the records was tabulated. The impervious area and the impervious area percentage of the parcels were added to the GIS database. From there, the parcels were broken down into four categories based upon their land use code: residential, non-residential, part residential, and undeveloped.

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The Six Mile Creek Watershed is the City's primary watershed. Photo: Friends of Six Mile Creek.
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Research was performed to see what user fee rate structures were being used by other municipalities that have instituted a stormwater utility user fee. The user fee rate policy that was developed for the City was based upon an equivalent residential unit (ERU) rate policy. The ERU was determined by taking the total impervious area for all of the residential properties and dividing it by the total number of residential dwelling units. The ERU base unit was estimated to be 1,976 square feet. All residential units, regardless of residential class, under the ERU policy would be charged one ERU. However, non-residential and part residential customers would be charged based upon their total impervious area per the equivalent residential unit. For example, if a commercial property has a total impervious area of 46,000 ft2, the property would be charged 23.3 ERUs (i.e., 46,000 ft2/1,976 ft2/ERU).

The SMP costs were determined for the first five years and the user fee rate was determined by using the SMP's cost for the fifth year, which was approximately $504,231. The user fee was calculated as follows:

(Residential Parcels)*fee + (Non-Residential Imp Area/1,976 ft2)*fee = Year 5 cost

The user fee was determined to be $4.60/ERU/month. Applying the user fee rate to the preliminary database, it would generate approximately $43,133/month or $517,598/year. Therefore, the user fee has the capability to provide the needed funding to support the SMP and depending upon the final SMP costs, the rate can be either increased or decreased as needed. Also, a credit system could be implemented, which would reduce the fee amount that a property owner would have to pay if they meet certain criteria set forth by the City. To continue receiving credit, certain guidelines would have to be followed by the property owner to ensure stormwater management facilities are still functioning as designed and are being maintained.

The implementation and integration of the stormwater utility program would require the following actions: adoption of a stormwater ordinance establishing the utility and rate structure; development of procedures to bill and collect utility revenues; coordination with the City billing department to administer the billing and collection of the fee; and verification of the billing information. Establishment of a separate City department is not necessary; however, the position of Stormwater Management Officer should be established and can be incorporated into the Department of Public Works.

Using the billing system and administrative operations currently in place is recommended and can alleviate some of the complexity and concerns with implementation. This has several benefits. First, the current billing system is already established and fully operational and the user fee can be incorporated as a separate line item. Second, the administrative operations are already in place and integrating the utility fee into the existing billing system allows for sharing the administrative costs among the various departments.

Stormwater utility rate structures are developed around two themes: equitable distribution of costs to users and balancing simplicity with equity. The rate structure for the stormwater utility asserts that the fairest rate structure is one that recovers costs incurred from the burden placed upon the system by the user. Burden is measured in terms of the runoff volume, rate, and quality from the user's property into the City's system. The rate structure reflects the concept that the greater the burden imposed on the system, the more the customer will pay. Based upon the preliminary analysis, a stormwater utility user fee has the potential to be an equitable, stable, flexible, and enterprise source of funding to support a stormwater management program that meets the NPDES stormwater program requirements.

About the Author:

Christina Zolezi is a civil engineer at Fuss & O'Neill of New York, PC. She holds an associates degree in applied science from SUNY Orange County Community College, a bachelor of science in civil engineering from Rennselaer Polytechnic Institute, and a master of civil engineering from Norwich University. The Stormwater Utility User Fee Feasibility Study for the City of Ithaca, New York was her master's degree project.

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