1. Funding Municipal Drainage Management Programs The Drainage Utility Comes of Age in Texas ASFPM National Conference San Antonio, Texas May 2012 George E. Oswald, P.E., D.WRE, CFM RPS Espey, Austin Texas www.rpsgroup.com 1

2. | rpsespey.com Presentation Outline ■ Funding Challenges ■ What is a Drainage Utility? ■ Texas Enabling Legislation ■ Implementation Process ■ Fee Assignment & Equity Considerations ■ Exemptions ■ Cost-of Service Analysis ■ Public Outreach ■ Texas Utilities Overview ■ Revenue Estimate and Tips for Your Community ■ National Legislative Initiative Needed 2

3. | rpsespey.com Municipal Program Funding ■ Challenges ■ Flood Hazard Reduction ■ Stream Erosion Mitigation ■ Water Quality Management ■ NPDES-MS4 Compliance ■ Funding Options ■ General Fund ■ Special Taxing/Assessment Districts ■ Federal & State Grant Programs ■ Impact Fees ■ Drainage Utility 3

4. | rpsespey.com What is a Drainage Utility?---Not a Rain Tax! ■ User-Fee, like Water/Wastewater/Solid Waste ■ Equitable User-Fee Basis: property stormwater run-off demand on drainage system ■ Impervious cover, i.e. rooftops, driveways/walkways, parking including compacted graveled surfaces ■ Guided by State Law, no property value consideration ■ User-Fee Collected on City Utility Bill ■ Provides Stable Revenue Stream ■ $ Managed in protected account ■ Supports long-term program implementation 4

5. | rpsespey.com Texas Municipal Drainage Utility Systems Act Very Good but not Perfect Texas Local Government Code Chapter 552.C ■ Charges Must be: Directly Related to Property Runoff Characteristics, Reasonable, Equitable and Non-Discriminatory ■ Charges Apply only to Developed Property ■ Revenue Can be Used to Support All Drainage Management Programs – O&M & CIP ■ Enterprise Funds Management Required ■ May Issue Revenue Bonds ■ Revenue Can be Combined with Other Sources ■ Ordinance Notification/Public Hearing Required ■ Utility Declaration, Assets Dedication ■ Fees, Enterprise Fund, Exemptions, Appeals 5

6. | rpsespey.com DRAINAGE UTILITY IMPLEMENTATION PROCESS 6 Public Information Program Program Needs Analysis CIP Facilities Plan System Maintenance Program Needs Analysis CIP Facilities Plan System Maintenance Rate Development Land Parcel Assessment Billing Unit Alternatives Rate Development Land Parcel Assessment Billing Unit Alternatives Budget Analysis Multi-year Plan Budget Analysis Multi-year Plan PUBLICHEARINGSPUBLICHEARINGS PUBLICHEARINGSPUBLICHEARINGS Ordinance Adoption Utility Fee Ordinance Adoption Utility Fee Billing System Implementation Parcel Data Verification Sample Billing Mail-Out Staff Training Billing System Implementation Parcel Data Verification Sample Billing Mail-Out Staff Training Billing System Evaluation $ Revenue = Results Revenue Projections $/ERU Funding Needs

7. | rpsespey.com How are User-Fees Assigned? ■ Impervious Area ■ Rooftops, Parking, Driveways, Walkways ■ Increases Volume & Rate of Runoff ■ Equivalent Residential Unit (ERU) ■ Average Sq Ft for Single-Family Properties, ~3000 ■ Used as Billing Standard ■ Rate Structure-Two Major Classes ■ SF Residential: Single Tier, Multi-Tier ■ Commercial/MF/Industrial/Institutional/Religious 7

8. | rpsespey.com Utility Billing Basis 8 Public Streets, ROW, Drainage Infrastructure not charged, considered part of Drainage System

9. | rpsespey.com Example Utility Billing Calculation 9

10. | rpsespey.com Land Parcel Data and Billing System ■ Appraisal District Records ■ Parcel Size ■ Building Footprint ■ Parking Area ■ Land Use ■ GIS Analysis ■ Planimetric Data ■ Orthophotography ■ Land Parcel Boundary Map ■ Commercial Development Record-Plans ■ Heads-Up Digitization & Spectral Analysis ■ Utility Billing System ■ Match Data to Existing Utility Accounts ■ Multiple Meters/Parcel ■ Customer Appeals Process 10

11. | rpsespey.com 11

12. | rpsespey.com Example Utility Rate Structure ■ ERU Value – 2,800 sq ft Impervious Area (IA) ■ Single-Family: Three Tiered ■ “Small”0.7 ERU, <2,100 sq ft IA ■ “Typical”1.0 ERU, 2,100-3,200 sq ft IA ■ “Large”1.6 ERU, >3,200 sq ft IA ■ Commercial/Industrial/Institutional ■ 16 ERU per Acre Impervious Area 12

13. | rpsespey.com Customer Equity-A Challenge Worth the Effort ■ TX statute does not define customer equity ■ Many differing fee assignment approaches are used, there is no standard in Texas ■ Land parcel impervious area and land area are dominant ■ Oddities-water meter size, traffic trip factor, flat rate for all, % of water bill ■ Increased equity requires more land data management 13 Equity Flat Rate/Capped Rate Multi-Tiered Custom Assignment

14. | rpsespey.com Exemptions-Confusing? Texas Local Government Code Chapters 552.C and 580 ■ Statutory (Mandatory) ■ Undeveloped Land ■ Institutions of Higher Education ■ Property with Private Drainage System (zero discharge) ■ State Property ■ Discretionary (City Policy Decision) ■ County Property ■ School District Property ■ City Property ■ Religious Organization Property 14

15. | rpsespey.com Cost of Service/Financial Analysis ■ Enterprise Fund Budget Model ■ Multi-Year Analysis ■ Affordability (Rates) ■ Phased Implementation- CIP, O&M ■ O&M-Staff & Equipment ■ CIP Bond Debt vs. Pay-as-You-Go ■ Reserve Fund ■ Emergency Repairs/System Replacement Establishes Initial and Projected Customer Billing Rates 15 $ / ERU = Annual Revenue Needs ($) Total # Billing Units

16. | rpsespey.com Public Outreach-Critical for Success ■ Public Meetings ■ Residential Customers ■ Commercial Customers ■ Follow-up with City Council ■ Information on City Web Site ■ What is a Drainage Utility? ■ Proposed Drainage Service Improvements ■ How are Fees Assigned? ■ How are Billing Errors Resolved? ■ Sample Billing Mail-Out ■ Resolve Issues before 1 st Billing 16

17. | rpsespey.com Texas Drainage Utilities 17 85 Now in Operation 14 in Evaluation Phase

18. | rpsespey.com Texas Drainage Utilities ■ Population Served- 500 to 2,100,000 ■ Annual Revenue- up to $130, 000,000 ■ Annual Revenue per Capita ■ Average $30, Maximum $80 ■ Single-Family Billing Rates for ERU ■ Average $4.30/month, Maximum $12.00/month ■ Commercial Billing Rates (1-acre parcel @ 90% impervious cover) ■ Average $45/month, Maximum $190/month 18

19. | rpsespey.com 19

20. | rpsespey.com Texas Lessons-Approach with Caution! ■ Law Suits/Threats ■ Arlington, Austin, El Paso, Houston, New Braunfels ■ Exemptions-Less is better, any exemption requires remaining customers to subsidize (pay more). ■ In Texas, Rail Roads are not exempt, will expect special consideration. ■ Commercial Rate Caps-Counter to utility equity principals and state statute but politically attractive, don’t go there. ■ Credits-OK if based on avoided cost to utility, do not just grab a number. 20

21. | rpsespey.com Utility Annual Revenue Estimate Annual Revenue Potential 7 X Population X $1/Monthly ERU ERU=Single-Family Residential Billing Unit Example: Population 50,000, $3.50/month per ERU Annual Revenue = $1,225,0000 21

22. | rpsespey.com Drainage Utility Tips for Your Community ■ Public Outreach is Critical for Community Understanding and Acceptance ■ Community Affordability is a prime consideration ■ Customer Equity is a good investment ■ Impervious area basis recommended ■ Multi-Tiered and/or Custom Site Fee-Assignment ■ Avoid Commercial Rate caps ■ Any “credits” should be based on avoided costs ■ Exemptions require other customers to subsidize ■ Sample Billing Mail Out before Go Live 22

23. | rpsespey.com National State-Legislative Initiative Needed! ■ User-Fee Funding is Critical for Success of Municipal Drainage/Stormwater Management Programs-the General Fund is exhausted. ■ Dillon Rule States (40) best served by enabling legislation ■ Non-Dillon Rule States require extreme caution ■ Recommendation to ASFPM ■ Develop Model Legislation ■ Coordinate with State Municipal Leagues for Adoption 23

24. | rpsespey.com Texas Drainage Utility Survey 24 http://www.espeyconsultants.com/drainage_utility_survey_espey_consultants.pdf

25. | rpsespey.com Texas Drainage Utility Survey http://www.espeyconsultants.com /drainage_utility_survey_espey_ consultants.pdf Google-”Texas Drainage Utilities” 25

26. | rpsespey.com 26 George E. Oswald, P.E., D.WRE, CFM goswald@rpsgroup.com RPS Espey 512-326-5659 www.rpsgroup.com

27. | rpsespey.com Commercial Monthly Billing Rate Calculation 27 # ERUs = Impervious Area (SF)/Parcel 3,000 SF/ERU Charge $ = # ERUs Parcel X $4.00 / ERU