Building Voter Support for Stormwater Fees

Hand voteMany local officials realize the need to improve stormwater management to protect water quality, but fear constituents would oppose a new fee for stormwater services. Experience shows a transparent approach that involves community stakeholders can build consensus.

by: Adrienne Vicari, P.E.
 

(These tips are excerpted from an article we published in the October 2015 issue of Pennsylvania Township News magazine and are used here with their permission. Reprints of the entire article are available upon request.)

Increasingly stringent stormwater regulations are causing municipalities to think about how they can fund badly needed stormwater system improvements in their community. Many municipalities are considering funding their program through user fees charged by a municipal authority, as authorized by Act 68 of 2013, but some municipal leaders worry that a new fee may be unpopular with residents and businesses.

Though stormwater utility fees are still largely unchartered territory in Pennsylvania (less than a dozen communities have established one here), the use of dedicated stormwater utilities and stormwater fees is a nationwide movement that has seen steady growth over the past four decades. Western Kentucky University reports that there are more than 1,500 stormwater utilities throughout the United States and Canada, serving communities as small as 88 people to more than 3 million. Their success in building consensus among constituents for stormwater fees can show local municipalities a path to approval in their own community.

HRG has used information from the Western Kentucky University study, the nationwide non-profit Water Words That Work, and several case studies published by the EPA (along with our own experience implementing stormwater authorities) to come up with several tips on how municipalities can build local support for stormwater user fees.

 

  1. Make sure you have identified and involved all the potential stakeholders – even those who oppose the formation of a utility – and form a stakeholder advisory committee. If you don’t attempt to address the concerns of your opposition in these committee meetings, they can come back to haunt you later when it comes time to pass the resolution. According to the EPA case studies, this is what happened in Dover, New Hampshire, and Huntsville, Alabama. Both communities had small advisory committees, but they did not engage all community groups. Though there was unanimous consent among the committee members to form a stormwater utility, the opposition of certain community groups who had not been represented on the committee ultimately drowned out their voices, and the municipal leadership declined to pass the resolution.
  2. Make the stakeholder committee an open forum where people feel comfortable expressing all points of view. Again, you want to deal with any potential obstacles proactively, rather than be blindsided by them in the final stretch. Stakeholder advisory committee meetings are more conducive to problem-solving and negotiating in a deliberative way than public meetings are. By including your opposition early in the process and giving everyone a chance to speak freely, you ensure that major obstacles to support will have been addressed before a public vote.
  3. Have your stakeholder committee discuss the stormwater program and what it can accomplish first. Don’t bring up funding till you’ve established a need for improvements and motivated people to support them. People need to know what they’re getting before they can be motivated to hand over their money.
  4. Clearly define the benefits of the program in all public outreach efforts. Tell people exactly what improvements you intend to make with the money you raise, and quantify the benefits of those improvements whenever possible. For example: “This project will reduce the likelihood of flooding along Main Street by 75%.”
  5. Show, don’t just tell. Visuals are particularly persuasive. Water Words That Work found that showing people photographs of how the fee would be used had the single most dramatic effect of any information provided in gaining approval of the fee.
  6. Choose your words carefully. Name the fee to clearly convey the service you are providing. “Stormwater management” is too vague and largely meaningless to the average person, but “clean water protection” has obvious value. In the Water Words That Work survey, “pollution control and flood reduction fee” tested better than any other term containing the words stormwater, authority or utility.
  7. Emphasize fairness. People generally believe that those who use a service most should pay more for it, so show them how your fee ensures that is the case. Explain why it’s important that non-profits pay the fee because they, too, contribute to stormwater discharges (often more than residents because of their large impervious parking areas). Tell them about credits that people can receive if they lower their stormwater impact by installing green infrastructure on their property. In general, people perceive fees based on actual impervious area to be the most fair and equitable (as opposed to a flat rate), but some of the communities EPA studied did successfully enact flat rates with effective public education about the reasons why that option was chosen.
  8. Demonstrate cost-effectiveness and be transparent about finances. If a stormwater utility is truly the best approach for your community, the numbers will convey that, and detailed economic studies are always an integral part of the planning process. Use those numbers to prove that the stormwater fee will better accomplish program goals than general fund revenue or any other option available. Voters can often be mistrustful of a government’s ability to use funds wisely. Being transparent about program finances (how the fee was determined, how it will be used) eases minds and reduces the chance of a legal challenge.
  9. Define this as a local solution to a local problem. Avoid talk about state and federal mandates or general environmental goals. If flooding is a recurring problem in your community, show how this program will reduce that problem. If pollution is a concern, talk specifically about keeping local waterways clean: the stream families teach their children to fish in, the lake where they go swimming.

Determining whether a stormwater utility is the most effective way to fund infrastructure needs in your community is a complex process that requires dual expertise in civil engineering and financial consulting. Unfortunately, some communities are afraid to even investigate the option because they believe their constituents will never approve of a stormwater fee.   In communities where utilizing general tax revenue is not the best fit approach, research by EPA and others cited in this article shows that an effective public outreach program, which includes key stakeholder groups in the earliest planning stages, can be successful in persuading people to accept stormwater management fees.


Do you want to learn more about how a stormwater utility could fund your stormwater program? Download our guide:

Determining If a Stormwater Utility Is Right for Your Community

Stormwater Utility GuideIt includes
• Answers to common questions about stormwater utilities
• More advice for how to build public consensus for stormwater fees
• An outline of the early steps you should take when investigating the feasibility of a stormwater utility

Download the guide at

www.hrg-inc.com/stormwater-utility-guide


VicariAdrienne Vicari, P.E., is the financial services practice area leader at HRG. In this role, she has helped the firm provide strategic financial planning and grant administration services to numerous municipal and municipal authority clients. She is also serving as project manager for several projects involving the creation of stormwater authorities or the addition of stormwater to the charter of existing authorities throughout Pennsylvania. Contact Adrienne about stormwater authorities.

The Potential Advantages of a Stormwater Utility for Financing Your Stormwater Management Needs

by: Adrienne Vicari, P.E.

West Clarion University Pond

Two years after the passage of Act 68, many municipalities still have legitimate concerns about whether a stormwater authority would be right for their community. In a previous article, HRG addressed concerns about public opposition, up-front costs, and a loss of control over the infrastructure covered under the MS4 permit. In today’s article, we discuss the potential advantages of stormwater authorities to municipalities searching for ways to finance their stormwater management programs.

Advantage #1: Stormwater authorities enable you to collect money from tax-exempt users.

Churches and non-profit organizations like hospitals contribute a lot of stormwater runoff to the local watershed, but a tax would never collect any revenue from them because they are tax-exempt. By using the stormwater authority structure, you can charge fees to these users and collect their fair share contribution to stormwater management efforts.

Advantage #2: Stormwater authorities can collect fees from multiple municipalities who may be contributing runoff to their watershed; municipalities cannot charge anyone outside their own borders.

Political boundaries and watersheds seldom coincide. Stormwater is not neatly contained by political boundaries, and watersheds often cross through more than one municipality. But townships and cities cannot charge other local governments for stormwater management under state law. A multi-municipal (or joint) stormwater authority, however, can be set up to serve an area that extends beyond the boundaries of a single municipality, which enables everyone within a particular watershed to contribute to the stormwater management services it requires.

Advantage #3: Stormwater authority fees are more equitable than a property tax.

As stated in #1 and #2, stormwater utility fees ensure that everyone who contributes to a community’s stormwater pays for the services they use (even tax-exempt organizations, particularly if a utility is set up on a watershed-wide basis).

But stormwater fees are also much more flexible and responsive to the true nature of stormwater than a straight property tax would be. The value of someone’s land has little to do with how much stormwater it creates, so a property tax is inherently unfair for this purpose. A property could be appraised at a high value and contribute very little to stormwater, but an experienced financial consultant can help set up an authority’s rate structure based on the quantity and/or quality of runoff a property creates (rather than charging a flat fee or basing it on acreage).

A municipality can also offer credits to property owners who install best management practices for controlling runoff. (This has the added bonus of encouraging good behavior: inspiring people to install stormwater control measures like rain gardens, buffers, etc. on their property.)

Thus, a well-designed stormwater utility ensures everyone pays according to how much he or she uses the service.

Advantage #4: Stormwater authorities provide a dedicated revenue stream for stormwater improvements.

Relying on general tax revenue for stormwater improvements isn’t practical for some communities. There simply isn’t enough money to cover all of the needs the municipality must address, and stormwater often falls to the bottom of the list because money is allocated to more high profile projects such as a bridge replacement or pavement rehabilitation. Unless there is major flooding, stormwater is often forgotten and doesn’t receive the financial attention it needs.

With a dedicated stormwater fee, the money is there to maintain, repair and replace stormwater infrastructure on a proactive basis, rather than waiting till flooding causes expensive damage or impacts public safety.

Advantage #5: A dedicated revenue stream for stormwater can improve the finances of a municipality.

It can do so in several ways. First, now that the municipality no longer directs tax revenue to stormwater management, it has more tax dollars available for its other priorities.

Second, debt associated with stormwater improvements is no longer considered direct municipal debt because it can be self-liquidated by the authority’s revenue stream. Therefore, the stormwater debt doesn’t count towards the municipality’s borrowing limit, and its impact on the municipality’s bond rating is reduced. (Since municipal authorities are not subject to the same restrictions on borrowing and bond rating concerns as municipalities, they are often able to implement larger projects or make improvements in a timelier manner than a municipality could.)

Third, many agencies that offer grants and loans expect the municipality to put up matching funds, which is hard to do when you don’t have a dedicated stormwater revenue stream. Even if matching funds are not an official requirement of the grant or loan, most funding agencies place a higher preference on recipients who have money available for the infrastructure because they have a greater confidence in their ability to complete the project if there are issues and to maintain it after it’s done.

Advantage #6: Stormwater authorities are better positioned to raise rates than municipalities are to raise taxes if stormwater obligations increase.

Tax increases are not popular politically, and they are hard to pass. As stormwater infrastructure needs change, municipalities may need a revenue source that is flexible enough to meet those changing demands.

Every municipality’s financial situation and stormwater needs are different, so it’s wise to seek the counsel of a consultant with dual expertise in engineering and financial consulting to determine if a stormwater utility is right for your community. If it is, your consultant can help you organize a program that maximizes an authority’s potential advantages: providing a dedicated revenue stream for stormwater management that is more equitable than other funding sources and freeing up the municipality’s tax dollars for other priorities without adding to its direct debt or negatively impacting its bond rating.


Do you want to learn more about how a stormwater utility could fund your stormwater program? Download our guide:

Determining If a Stormwater Utility Is Right for Your Community

Stormwater Utility GuideIt includes
• Answers to common questions about stormwater utilities
• Advice for how to build public consensus for stormwater fees
• An outline of the early steps you should take when investigating the feasibility of a stormwater utility

Download the guide at

www.hrg-inc.com/stormwater-utility-guide


VicariAdrienne Vicari, P.E., is the financial services practice area leader at HRG. In this role, she has helped the firm provide strategic financial planning and grant administration services to numerous municipal and municipal authority clients. She is also serving as project manager for several projects involving the creation of stormwater authorities or the addition of stormwater to the charter of existing authorities throughout Pennsylvania. Contact Adrienne about stormwater authorities.

Overcoming Concerns About Forming a Stormwater Authority

by: Adrienne Vicari, P.E.

pond

Act 68 gave municipal authorities the ability to finance, own, operate and lease stormwater facilities, but, two years later, many municipalities still have questions about whether an authority is right for their community. Aging infrastructure and increasing regulatory obligations from the state and federal government have put a heavy burden on towns across Pennsylvania, and they are searching for ways to finance stormwater management beyond general tax revenue. However, concerns about the upfront investment creating an authority would require and the possible backlash from members of the community give them pause.

Every municipality’s financial situation and stormwater needs are different, so it’s wise to seek the counsel of a consultant with dual expertise in engineering and financial consulting to design a custom solution tailored to those unique needs. If forming a stormwater utility is indeed a good fit for your community, your consultant can help you overcome the typical concerns through a strategic approach built upon sound financial and engineering principles.

Concern #1: The community will be against new fees for stormwater.

It is true that residents, business owners, and non-profit organizations will initially question the need for another bill; no one likes paying new fees. However, municipalities can win public support with extensive community involvement and educational outreach. It’s important to communicate that the new fee will be used exclusively for stormwater management and will not be “raided” for other purposes. It’s also important to show the community exactly how their money will be invested: list the specific improvements you intend to make and use photographs and illustrations whenever possible. Emphasize the fairness of the fee: that everyone pays for the services they use based on the stormwater they contribute to the system (and not simply the value of their property). Accentuate the positive by naming the fee after the benefits it provides to the community (such as a “Clean Water Management Fee”), as opposed to the problems it addresses. Invoice the fee separate from taxes, similar to water and wastewater billing.

Concern #2: It will cost too much to get the authority up and running.

Most municipal budgets are stretched to their limit as it is, so investing money in the start-up costs associated with a new authority is a hard sell when that money could be used for maintenance and repair of ailing infrastructure. But, even though the results are not physically tangible like new culverts or pipe repairs, the money you spend on a new stormwater authority is a true investment in your community’s future. The authority will cost money to get up and running, but it will create revenue in the future that can be used to proactively address stormwater needs before they become costly emergencies. What’s more, that dedicated revenue stream makes you eligible for grants and low-interest loan programs that otherwise would’ve been out of reach because of the need for matching funds.

Speaking of funding, some programs will help defray the start-up costs associated with organizing an authority. For example, West Goshen Township, Chester County, has entered into a 50/50 cost-share with the Army Corps of Engineers for technical assistance with mapping and inventory of their stormwater infrastructure. This step is necessary to develop the Stormwater Management Program and ultimately determine the revenue requirements necessary to establish and justify the stormwater rate.

Depending upon whether the municipality sells its stormwater assets to the authority or leases them, the municipality can also receive an upfront or annual payment from the authority for the transfer of facilities, which will help to absorb some of the start-up costs, as well.

However, municipalities may be able to avoid a lot of the start-up costs associated with an authority by simply adding stormwater to the charter for their existing water or wastewater utility. If they do, the structure and administrative functions (the board, billing, etc.) will already have been set up; the articles of incorporation will just need to be amended.

Concern #3: We don’t want to give away authority over our stormwater infrastructure, especially considering the liabilities we have from our MS4 permit.

Though the municipality can appoint people to its board, ultimately, the authority is an independent body that makes its own decisions. Yet currently the municipality – not the authority – is responsible for any fines incurred from not complying with MS4 permit requirements. This arrangement can easily seem dangerous to many municipal officials, but solutions are available.

A knowledgeable financial consultant can assist in structuring the authority in many different ways to give the municipality flexibility in deciding which powers and purposes it wishes to assign. One option is to set up an operating authority and pair it with a management and services agreement. Under this arrangement, the municipality transfers its facilities to the authority, who collects a rate and charges from local users to finance their operation, maintenance and improvements. The authority then “hires” the municipality to conduct operations and maintenance and perform administrative functions such as billing.

Another option is the reverse leaseback authority. Under this arrangement the municipality continues to own the facilities and finance capital improvements, but it leases the system to the authority for operation, maintenance and the setting of rates and charges.

Hybrid versions of these examples can also be established based upon the priorities and goals of the municipality.

In addition, PA DEP is currently working through amendments to its program which may allow municipalities to transfer their MS4 permits to a stormwater authority along with the drainage and stormwater facilities. By transferring the permit, the municipality would also transfer the legal obligations and liabilities that go with it.

As you can see, the concerns that municipalities have about stormwater authorities can be alleviated through joint financial and engineering planning. Though municipalities typically think of their stormwater infrastructure as an issue for their civil engineer, municipal authorities are primarily financial organizations, so a thorough understanding of finance is important to ensure financial and legal obligations are met in the most advantageous way to the municipality as possible. With fears allayed, municipalities are then able to see the many advantages a stormwater authority offers. In our next post, we discuss these advantages of forming a stormwater authority.


Do you want to learn more about how a stormwater utility could fund your stormwater program? Download our guide:

Determining If a Stormwater Utility Is Right for Your Community

Stormwater Utility GuideIt includes
• Answers to common questions about stormwater utilities
• Advice for how to build public consensus for stormwater fees
• An outline of the early steps you should take when investigating the feasibility of a stormwater utility

Download the guide at

www.hrg-inc.com/stormwater-utility-guide


VicariAdrienne Vicari, P.E., is the financial services practice area leader at HRG. In this role, she has helped the firm provide strategic financial planning and grant administration services to numerous municipal and municipal authority clients. She is also serving as project manager for several projects involving the creation of stormwater authorities or the addition of stormwater to the charter of existing authorities throughout Pennsylvania. Contact Adrienne about stormwater authorities.

Considering a Stormwater Authority? 12 Steps to Help Townships Make the Decision

by: Russ McIntosh

stormwater_author

This article was published in the Winter 2014 issue of the Township Engineer newsletter, as produced by the PA State Association of Township Supervisors.

Since the signing of Senate Bill 1261 (Act 68 of 2013) last September, many townships have been discussing the benefits and feasibility of using an authority to address stormwater issues versus continuing to use their established policies, practices, and funding sources. As you might imagine, there is no single, simple answer to this question. Like many other aspects of township administration, each community’s needs are unique, and any one-size-fits-all approach seldom does.

One reason for this is that stormwater management is a function of each township’s location in the watershed, its unique topography and land use, and its demographics. Often, the existing stormwater facilities are passive, sitting idle much of the time until a large rain event occurs. Unlike water or wastewater utilities, where most people can see a direct benefit, stormwater management is seldom seen as a service. Also, stormwater issues are often addressed through the land development process and are not perceived to have any ongoing maintenance costs, which can make separate billing for this service much more difficult.

There is no doubt that Act 68 was designed to expand the funding choices available to municipalities for stormwater management and better distribute the costs among those who are most responsible for creating issues. One challenge that townships will encounter is the amount of preplanning required to decide exactly what service the stormwater authority is to provide, who will benefit, the types of facilities that are needed, and how costs will be calculated and apportioned.

Determining benefits and costs can be especially tricky in townships that have multiple drainage basins, privately owned stormwater facilities or those located on private property, a large number of tax-exempt properties, or stormwater that originates in a neighboring municipality. Successful stormwater management will include a blend of fees, inspections, ordinance enforcement, and community education and support. The exact combination of measures that’s right for your township will require evaluation, analysis, and sorting through a lot of data.

Evaluating stormwater management need
As you consider your township’s stormwater management needs, the following 12 steps will guide you in asking the right questions, organize your thinking, and help you collect the necessary data to make an informed decision.

  1. Conduct, review, and update an inventory of township-owned stormwater facilities. Your township needs to know what it owns now and how much it is spending to maintain existing facilities.
  2. Identify facilities located on private property that are directly connected to township-owned facilities. While the township may not be spending money on privately owned facilities, it has a vested interest in their proper operation and maintenance. The township needs to determine whether it has sufficient power under existing ordinances to ensure that these facilities are being maintained properly and will operate effectively when needed.
  3. Identify facilities located on private property that are not directly connected to township-owned facilities and evaluate the ability of the owners to properly maintain them. Again, does the township have sufficient power under existing ordinances to make sure these facilities are being maintained properly and will operate effectively if needed?
  4. Review and revise existing policies and ordinances that require private owners of stormwater facilities to properly maintain them, and establish fines for noncompliance. For example, if facilities are owned by a private entity, such as a corporate landlord or a property owners’ association, and are not properly maintained, should the renters or residents be asked to pay a stormwater fee if the township does not assume ownership of these facilities? This may take the form of a separate charge to individual homeowners whose property is served by such facilities.
  5. Revise the inventory as needed to include any facilities for which the township has or will assume responsibility.
  6. Regularly review your inventory and assess the general condition of stormwater facilities to determine future projects. This will provide the basis for the township’s stormwater management capital plan.
  7. Estimate the timing and cost of future projects and identify the need for financing. If a substantial amount of debt must be incurred to finance additions or upgrades, does the township have sufficient borrowing capacity to incur that amount of debt?
  8. Identify the township’s current operating costs for existing stormwater management facilities, including labor, materials, and services.
  9. Estimate future annual operating costs and any annual debt service costs associated with existing or planned stormwater facilities.
  10. Discuss the public’s perception of stormwater management’s benefits and any negative impacts of using general tax revenue versus a dedicated user fee. One of the important elements here is the percentage of “uncollectable” fees versus the amount of revenue that may be lost due to tax-exempt properties.
  11. Determine the benefit of a separate stormwater authority and what form it will take — operating or leaseback. One factor to consider is the regulatory environment. The township will always remain responsible for the proper enactment and enforcement of state and federal regulations, so its relationship with an authority must be cooperative. It is also likely that, given the relatively short history of stormwater user fees in Pennsylvania, the township may be asked to guarantee the authority’s debt.
  12. Be prepared to advance funds to accomplish many of these steps before an authority can begin generating revenue. Act 68 of 2013 amended the Municipality Authorities Act to include under the purposes and powers of a municipal authority “stormwater management planning and projects.” No other sections of the act were amended. Consequently, stormwater authorities have the same powers and limitations placed on all authorities. Charges must be uniform and reasonable.  This means that before any billing can occur, the creating body must identify the scope of service and the facilities that are included; determine their costs of acquisition, operation, and maintenance; and adopt a basis for billing. Also, authorities may only bill for service they render; they have no power to “tax” for the general good. Therefore, the township may have to put up funds initially to get the ball rolling.

Tailor the steps to your township
The steps presented above are simply guidelines, and not all steps may be necessary for all townships. Some townships, for example, may find that a great deal of time will be necessary to complete some of the steps. In other cases, it may not be necessary to conduct the complete inventory if a township already has a stormwater facilities capital plan or if all such facilities are privately owned.

Townships should carefully consider the benefits and risks involved in establishing a stormwater authority, and these steps may help them to do so. Remember that the intent is not to expend more time and money on stormwater analysis, but simply to ask basic questions and decide what direction looks most beneficial in the long term.


Do you want to learn more about how a stormwater utility could fund your stormwater program? Download our guide:

Determining If a Stormwater Utility Is Right for Your Community

Stormwater Utility GuideIt includes
• Answers to common questions about stormwater utilities
• Advice for how to build public consensus for stormwater fees
• An outline of the early steps you should take when investigating the feasibility of a stormwater utility

Download the guide at

www.hrg-inc.com/stormwater-utility-guide


McIntoshRuss McIntosh is a vice president of HRG and a leading expert on municipal and municipal authority finance.  His broad-ranging experience includes project financing, grant administration and compliance, financial consulting, military master planning, utility and corporate accounting, and business management/ownership.