Is a Stormwater Utility Right for You?

Managing stormwater quality is an unfunded mandate. The cost for capital and operations will have to be funded at the local level, through taxes or a fee.

By Michael Schober

By now, most municipalities are familiar with the many acronyms associated with stormwater. They have permits for their Municipal Separate Storm Sewer (MS4) systems and have completed their Pollution Reduction Plans (PRP). Regardless of which acronym chosen, municipalities are faced with increasing regulatory requirements and diminishing budgets with which to address them. Let’s face it, with local municipal / political priorities, parks and roads will always get funded before projects for reducing sediment to our streams. Therefore, many municipalities are turning to alternative revenue models to fund stormwater projects.

Rather than competing for funds from the municipality’s general fund, some municipalities are forming either stormwater utilities (a department within the municipality, much like sewer or water) or stormwater authorities. In both cases, the utility or authority charges a user fee dedicated strictly to stormwater quantity and / or quality projects which then eliminates competition for scarce revenues.

The decision to keep the stormwater utility within your municipality, or form a separate authority, will depend on several factors. Each municipality will have to evaluate its operation, and determine its goals and desired outcomes. Before doing so, consider the following:

Stormwater Department – Forming a stormwater department is typically easier because the framework of employees and policies are already in place. There is also the ability to cross-train employees and use existing equipment as dual-purpose. Of course, since the funding mechanisms are separate, keeping close account of where all costs (labor and equipment) are incurred, and are being charged to the correct accounts, is paramount. Although the revenue funds are kept separate, it still may be difficult to prioritize where municipal employees and equipment focus their efforts.

Stormwater Authority – The advantage of a stormwater authority is the separation of funds and employees from any competing interests. All funds and employees are dedicated to stormwater-related projects. The authority can plan and prioritize projects without political influences. An authority can borrow funds without incumbering the borrowing capacity of the municipality. An authority has the capability to do projects outside the jurisdiction of the municipality which can result in economies of scale, as well as increased grant opportunities. However, forming a stormwater authority can be a complex process and will require seed money to get it up and running.

Whether it’s a stormwater department or stormwater authority, there will be a need to establish a fair and equitable stormwater rate. There are several ways to do this and most equitable methods are based on the amount of stormwater a property produces. This makes it a user fee; not a tax. Ultimately, the stormwater fee will be based on your municipalitie’s land use characteristics, resources and preferences.

Most fee structures begin with the Equivalent Residential Unit (ERU). Much like the EDU for sewer or water, the ERU is based on the amount of impervious area on a property. Impervious areas are typically rooftops, driveways and sidewalks. An average square footage of impervious area is calculated for residential properties. For instance, the average impervious area could be 3,000-square-feet (SF), representing one (1) ERU. If a commercial property in the same municipality consisted of 9,000-SF impervious, it would be charged for three (3) ERU’s. It should be noted that non-profits such as schools, universities and churches would pay the fee based on their calculated ERU (remember, it’s a user fee; not a tax). There are several variations to this type of fee structure:

The Residential Tier System is similar to the ERU, but it divides residential properties into different rate tiers based on the amount of impervious cover. While this system offers more equity, it is more difficult to manage and may be more vulnerable to legal challenges than the ERU method.

The Intensity Development Factor adds a land use component by allocating cost based on the percentage of impervious area relative to the entire parcel size. This system recognizes that stormwater from a farm house on 20 acres has a different impact than a house in a densely populated neighborhood. These land use categories can be broad, difficult to implement and even more difficult to explain to the public.

The Residential Equivalent Factor (REF) uses a highly-scientific approach to determining stormwater impacts from each parcel. For each parcel, REF considers soil types, land use and ground slope to predict the expected amount of stormwater discharge for a given storm intensity. While this approach is arguably the most exact, performing these calculations for each property is very time-consuming and explaining this to the public is a significant challenge.

Regardless of the rate structure selected, it may be viable to consider offering a credit program that can reduce the stormwater fee for installing or conducting practices that reduce stormwater runoff or improve stormwater quality. These are generally referred to as Best Management Practices (BMP’s). Each municipality will have to decide who is eligible for credits and the amount of reduction for a given BMP. Some municipalities offer credits to only non-residential properties as a means to limit the complexity of managing the credit program.

Finally, a robust public education program is essential for gaining public and stakeholder approval. This should include involving key stakeholders early in the process. Key stakeholders may include elected officials, non-profits, schools / universities and the business community. Typically, these are the properties that will be seeing the larger stormwater bills. Getting their input early will help them plan for this and will provide valuable feedback for moving forward.

Managing stormwater quality is yet another unfunded mandate from the EPA. The cost for capital and operations will have to be paid for at the local level, whether it’s via taxes or a stormwater fee. Once the public understands this, and that a stormwater fee can be applied equally among all property owners, then there is general acceptance. Residents want to know that the fees they pay are going toward the intended projects. A stormwater fee is one way to ensure that happens.

Michael A. Schober, PE, BCEE, T&M Associates. Mr. Schober has over 33 years of experience in the field of water resource engineering. He has been involved in dozens of water, wastewater and stormwater projects and has worked with municipalities and authorities to develop stormwater utilities. He has a BS, Civil Engineering, from Villanova University.