Funding Stormwater Management Programs with User Charges – Experiences and Models in the US Inter-American Development Bank User Charge Based Funding Mechanisms for Stormwater Management T. Duncan Rose lll GHD Consulting Inc. Technical Director, Advanced Asset Management

2 Stormwater Management As A Three Legged Stool Stormwater regulation Stormwater best management practices Funding model

3 Stormwater Management As A Three Legged Stool Stormwater regulation Stormwater best management practices Funding model

4 Stormwater Management As A Three Legged Stool Stormwater regulation Stormwater best management practices Funding model

5 Discussion Outline l. The Rate Model Context The “User-charge” Concept Legal Considerations The Theory of Runoff Burden “Cost Apportionment” “Parcel Apportionment” 2. Developing A Rate Structure Runoff Burden Rate Models Exemptions Credit and Adjustment Policies Services vs. Infrastructure Cost Recovery 3. Fitting the Model to the Community 4. Summary

6 The Hydrologic Cycle Lake/Ocean

7 What is Runoff?

8 Impervious Area & Runoff

9 Why is Runoff a Problem? Flooding/Ponding Pollution

The Rate Model Context

11 What is a Stormwater Utility? ACCOUNTING ENTITYSERVICE DELIVERY ENTITY ACCOUNTABILITY!

12 How Much Stormwater Management? Private vs Public Burden Inches of Rainfall per Storm Event Time Interval - Years PublicPrivate

13 Basics of Stormwater Utility/User-Charges Generates revenues through user-charges - the more the benefit, the greater the charge. Two major benefit theories: –“Runoff Burden” Model –“Value of Loss” Model Only parcels that are hydrologically connected or otherwise benefited should be charged. Good rate structures provide credits for privately maintained facilities and adjustments for unusual site- related characteristics.

14 Legal Parameters Clear authority / public purpose Rational nexus / special benefit Not arbitrary / fair and reasonable Equal protection / uniform application Fees versus taxes

15 “Runoff Burden” Model Accumulated runoff must be managed if owners are to enjoy the use of their property. The burden of managing the cumulating runoff falls to the community. Each parcel that contributes benefits from the stormwater system. The amount of runoff generated and passed to system represents a proportionate share of benefit. Impervious area is most common proxy to measure runoff (“fair share”).

16 Managing the “Burden of Runoff” A parcel (customer) receives service through the management of the stormwater passed from the parcel to the County’s/City’s stormwater system.

Who Gets Charged and For What Services? Cost Apportionment

18 Service Area Definition: Concept of Connection

19 Service Area Definition “Rubber Ducky” test Technique: Apportion stormwater costs only to those parcels which are hydrologically connected to the jurisdiction’s stormwater system.

20 SERVICE AREA Sarasota County O & M Service Area Utility- Wide Service Area - County Area Less Cities “Map & Crayon Drill”

21 Projected Enhancement Program

22 Capital Costs & Basins Issue is benefit - does a “rational nexus” or “special benefit” exist to a parcel in one basin for improvements in another? Conservative Solution - bill only those parcels hydrologically related to the capital project Counter-argument - sewer and water utilities bill across gravity basins for improvements

Developing A Rate Structure

24 Basic “Runoff Contribution” (Burden) Models Four fundamental models: –Impervious Area –Pervious + Impervious Area –Land Use Density Intensity –Pollutant Load Components: –Base billing value –Rate classes –Exemptions –Credits –Adjustments “DCIA” “Drain-To” “LOS”

25 “Impervious” & “Pervious + Impervious” Area Models

26 Standard Billing Units ( Equivalent Stormwater Units - “ESUs” ) 3 “standard” households Generates same runoff as

27 What Determines Runoff? Impervious Area Soil Group Vegetative Cover Antecedent Moisture Condition Connectivity (% DCIA) Topography

28 Typical Rate Classes General Residential Condominium Non-residential Condominium Single Family Residential Duplex Mobile Home Governmental Non-Billable Exempt

29 Residential Tiers Small=.55 ESU < 925 sf Standard = 1.00 ESU < 2260 sf & > 925 sf < 3260 sf & 2260 sf Imp Area Range Class Bill Units > 3260 sf = 1.52 ESUs Large = Calculated (Median, General Class) Very Large

30 Exemptions “ Undeveloped” Institutional Exempt Low Income Legal Principle: –Equal Protection –Uniform Application

31 Need for Credits and Adjustments “But my parcel (subdivision) does not drain to a City/County system, why should I have to pay?” “We have our own private stormwater system which cost a lot of money to build; will we have to pay?” “My barn is in the middle of 10 acres; little if any runoff reaches a City/County system. Why should I pay?”

32 “Credits and Adjustments” CREDIT Reduction in charge for incorporation on-site of stormwater facilities and private maintenance ADJUSTMENT Modification made to billing record to reflect site specific runoff characteristics which are substantially different from those attributed to the base billing unit.

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34 ESU Calculation Model = BILLEDESUs IMPERVIOUS AREA  BASE ESU VALUE X SITE ADJUSTMENT FACTOR “DRAIN TO” DCIA X SITE MITIGATION FACTOR* PRIVATE, ON SITE FACILITIES < 1.0

35 Land Use Model

36 “Impervious Area Coverage Factors “ This approach imputes impervious area to a parcel Coverage Factors Single Family0.35 Multi-family0.65 Commercial0.90 Office0.80 Industrial0.85 Institutional0.62

37 Land Use Model Step 1: Determine Land Use Class For Parcel Step 2: Determine Gross Area Of Parcel Step 3 Multiply: Step 4: Divide By Base Billing Value = Base Billing Units Step 5: Bill = $Rate * # (Imputed) Billing Units “LUC Impervious Area Coverage Factor “ X Gross Area

38 Pollutant Loading Model

39 Modeled on Wastewater Industrial Surcharge Concept: 1. Identify treatment parameters (sediment, BOD, K, N, “Daily Floating Fish”, etc.) 2. Apportion load to SICs/land use (per square foot) 3. Estimate total load treated by City/County facilities OR aggregate load by total contributing area 4. Allocate portion that exceeds residential load to non-residential uses. 5. Calculate treatment cost per unit per parameter 6. Apportion cost to each parcel based on SIC/Land use Quality Surcharge Concept Base Load apportioned to all parcels at residential load level Excess load apportioned to contributors

40 Pollutant Load Table Dr. Harvey Harper, P.E. Stormwater Chemistry & Water Quality

41 “Pollutant Load” Centered Rate Baseline load range = all parcels within this range pay a flat fee for this parameter. Any parcel discharging a “parameter of interest” whose load exceeds, say, 300% of base load, pays the base plus per unit charge above the base for that parameter Baseline load = point estimate for the single family residence for a given parameter

42 Model 1- “Pollutant Load” Centered Rate “Impervious area” is replaced with “# of units of expected discharge” for a designated treatment parameter or parameters (Nitrogen, Phosphorous, Suspended Solids) Where “# of units of expected discharge” is based on pollutant load tables Becomes

43 Model 2 - Pollutant Loading Surcharge QUALITY SURCHARGE = BILLEDESUs IMPERVIOUS AREA  BASE ESU VALUE X SITE ADJUSTMENT FACTOR “DRAIN TO” DCIA X SITE MITIGATION FACTOR* PRIVATE, ON SITE FACILITIES < 1.0

Fitting the Model to the Community

45 Which Model? Impervious Area Pervious + Impervious Land Use Pollutant Load Integrity Simplicity Data Applicability Model A- A+ B A BCABBCAB Hi Very Hi Mod Hi Broad Narrow Broad Narrow

46 Collection Options Fee Piggyback utility bill Cut off water? Send own utility bill Court order? Legal options to collect delinquencies substantially affects billing strategy, and, consequently, the rate structure itself. Assessment Governed by Statutes Case Law: “Fair & Reasonable” “Special benefit”

47 Billing Issues How to generate initial billing data base? Bill the owner or the resident? Who will maintain data base? Fee Based –How to interface with existing billing/collections system and function? –How to allocate bill to multiple tenants? –How to cross PINs to billing account numbers? Assessment –How to interface w/ Property Appraiser/Collector?

48 Setting the Rate 1. “Budget Needs” Approach 2. “Politically Feasible Maximum” Approach FY Budget # of net billing units

Summary

50 Summary 1Are built around a carefully defined and conceptually sound rate model that clearly defines benefit provided by the utility to its customers 2.Contain a clearly described credit policy to award reductions for privately maintained site-related attenuation facilities that are at a defined performance level; 3.Contain a clearly described adjustment policy to assign adjustments to those billing accounts where, due to unusual site-related characteristics, impervious area (or some other relevant core billing parameter) simply does not fairly describe the relative burden placed on the community’s stormwater management system by that parcel; 4.Provide for a systematic billing records review procedure that can be initiated by utility customers; 5.Address the distinction between capital charges and service charges; Contextually savvy (and legally defensible) rate structures:

51 Summary (cont’d) 6.Clearly define exemption classes, if any, consistent with relevant legal issues of consistency and uniform application of law; 7.Address how public infrastructure is to be incorporated into the rate structure; 8.Clearly define the geographic range of the service area according to benefit accorded to the rate payer; 9.Demonstrate reasoned findings by the council/commission relevant to the rate structure that are specific to the community through incorporation of evidentiary findings; and 10.Are implemented with an eye toward utilizing the most practical legally available collection mechanics.

Questions & Discussion