HomeMy WebLinkAbout04/12/2001, 1 - NATIONAL POLLUTANT DISCHARGE ELIMINATION SYSTEM (NPDES PHASE II) AND FINANCING OPTIONS M �y0,m
council Apr. 12, 2001
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C I T Y OF SAN L U IS O B I S P O
FROM: Michael D.McCluskey, Director of lic Works
Wayne Peterson, City Engineer
SUBJECT: NATIONAL POLLUTANT DISCHARGE ELIMINATION SYSTEM
(NPDES Phase II) and FINANCING OPTIONS
CAO RECOMMENDATION
1. Review and discuss the National Pollutant Discharge Elimination System (NPDES)
program and funding options.
2. Receive and File "Storm Water Management Program-NPDES Program Requirements,
Recommended Activities and Approach, Program Staffing, and Estimated Costs for City
of San Luis Obispo, California" by Questa Engineering.
3. Conceptually approve formation of a Stormwater Drainage Utility Enterprise Fund, with a
tentative effective date of July 2002, and authorize staff to further develop rate structure
and cost recovery options, and return to the Council with specific recommendations.
REPORT IN BRIEF
The City has received two reports: the first discussed how the City may implement the NPDES
program and the second how the City can pay for it. While the actual cost of implementing the
initial NPDES program is subject to more study, it is clear that the program will be costly and
will have a negative impact on the General Fund unless an alternative funding source is found.
The funding report explains three options in paying for the new program: 1)pay for it entirely out
of the General Fund, or 2) establish a new revenue source by creating a Stormwater Utility
enterprise fund that collects fees from benefiting properties in the community, or 3) use a
combination of(1) and (2). The consultant who wrote the report and the staff recommend that the
Council consider forming an enterprise. In doing so, we do not recommend initially setting fees
at full cost recovery; however, as with our other utility funds (water and sewer), we believe this
should be the long term goal.
DISCUSSION
Background
The Environmental Protection Agency(EPA) has issued orders that the City must comply with
the Clean Water Act (CWA), NPDES Phase.II requirements. Those require the City to submit a
Notice of Intention (NOI) and a plan of compliance to the Regional Quality Control Water Board
(RWQCB) by March 2003. The program should raise the conscientiousness of the community
about how pollution is released into the storm drainage system and from there into the creeks.
National Pollutant Discharge Elimination System Financing Options
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Several terms appear in the consultants reports and this Council Agenda report that need to be
defined.
1. Best Management Practices, BMPs, are measurable activities identified as being the best
way to accomplish the various goals of the Storm Water Management Program (SWMP).
2. Municipal Separate Storm Sewer Systems are called MS4's.
3. MCM's are Minimum Control Measures.
4. NPDES Phase Il is the name for the Clean Water Act, dealing with small MS4's, those
with populations under 100,000.
5. The Certified Unified Program Agency (CUPA) is administered by the Fire Department
and is responsible for managing hazardous materials stored by private companies.
This is the third meeting that the NPDES issue has been before the Council. On May 16, 2000,
the item was introduced to the Council and on July 18, 2000, the Council was asked to authorize
a request for proposals for the consultant work being presented at this time.
Two items are before the Council for consideration. The first is a study commissioned by the
Council to determine what the City is currently doing that will help meet forthcoming NPDES
requirements and those items yet needed to be implemented to fully meet the requirements of that
federal program. This study is called the "Storm Water Management Program-NPDES
Program" and was prepared by Questa Engineering (SWMP). Due to the length of the report
staff has only included Section one as an attachment to this report. Council may choose to
review the entire report in the reading file. It is arranged by sections with each section discussing
a different control measure listed in the Phase Il program.
The second item for consideration is a study prepared by the engineering firm of Black & Veatch.
They were retained to identify various alternative methods to pay for the NPDES stormwater
management requirements. The title of their report is: "NPDES Phase H Stormwater Financial
Feasibility Study" (SFFS). The Executive Summary of the Black & Veatch report attached to
this report. The entire report is included in the Council Reading File.
The Storm Water Management Program (SWMP)
In this report the consultant investigated the requirements of the NPDES program; what activities
the City is currently performing; and what additional activities the City should perform to comply
with the law. It is based on the best knowledge of what BMP requirements will be when the EPA
finally lists them. The EPA was scheduled to release a listing of BMP's in October 2000, but as
of the writing of this agenda report it is not available. Questa's report is based on expectations of
what the City's Stormwater Management Plan will need to be when it is submitted to the
RWQCB in March of 2003. Between now and then, the EPA will be releasing both their list of
BMP's and measurable goals for BMP's. The City may need to modify the Questa plan to
comply with RWQCB's requirements when they are known.
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The report identifies that the City is currently performing about $322,000 in work supported by
the General Fund that may meet the BMP requirements of the NPDES Phase II program. The
report also identifies another $251,000 in annual work that should be done and $489,500 in
startup costs to implement the NPDES Phase H SWMP. Together, these costs imply that the
City will be spending $3.4 million dollars over the next six years to comply with the law. $1.8
million of this is a new cost. Unless other options are considered, support for these costs at this
time will come from the General Fund with a small amount from the Water Utility's Water
Conservation Program. The Water Conservation Program performs some services that overlap
into activities that are similar to those performed by the SWMP.
New programs needed for implementation by the SWMP are the following:
1. Develop a public information and education program
2. Present workshops and classes for contractors, citizens, students and property owners
informing them how they can help keep rainwater runoff clean.
3. Train City employees how to implement Best Management Practices (BMP's).
4. Require and inspect for compliance of no silt run off from developed sites both during
and after construction.
5. Watch for and eliminate illicit discharges into the storm drainage system.
6. Provide annual reports to the RWQCB on how we are doing.
Staff feels the report is helpful and will be the basis for our future Management Plan. When the
EPA provides information regarding BMP's, staff will be able to complete the Plan using this
plan as the basis.
Governance Issues
Currently, four departments manage elements of a future NPDES program: Public Works,
Utilities, Fire and Community Development. Both consultants discussed the issue of where
overall responsibility for this program should be placed in the organization. In the future,
dependent on how the program grows, the City may need to reconsider our current organizational
approach to this. For now staff recommends the program be administered out of the Public
Works Department and that the other City departments provide support relative to their related
activities.
The Storm Water Financing Feasibility Study(SFFS 1
Black & Veatch was asked to look at ways to fund all the needed expenses beyond the obvious
way, the General Fund. The consultant also looked at other types of fund augmentation programs
such as assessments, bonds, and fee programs. Since the NPDES Phase II program is an ongoing
one involving operations, maintenance and capital outlay, and because the program is a
requirement of the federal government, the City needs to have a reliable method of supporting the
costs.
It is important that the Council understand that this part of the Clean Water Act is beginning
much the way that the EPA began regulating sewer outfalls in the 1950's. That program started
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very small and in time grew to the point now where the City's sewer program requires a revenue
source in excess of$7 million per year.
In funding this new environmental protection initiative, the consultant recommends that the City
establish a separate stormwater utility operated as an enterprise fund. The consultant also
recommends that fees be charged to all benefactors and contributors to the stormwater system
within the City limits, including federal, state and county agencies as well as the City should
share in the stormwater management program costs. The City would pay for its streets, parks,
and buildings at the same rate a private party would be billed. This is consistent with our water
and sewer programs. Black & Veatch recommend that the City charge fees based on impervious
area(the area that does not allow any percolation of rainwater).
Proposition 218
Under certain circumstances, Proposition 218 limits the City's ability to set taxes, fees and
assessments. In the case of fees, the provisions of Proposition 218 are only applicable to those
that are "incident to the ownership of property." In other words, those required to be paid solely
because of property ownership. If structured as recommended by the Consultant, stormwater fees
will not be based on property ownership, but on services received as measured by stormwater
run-off. In short, property ownership will not be the basis for paying the fee: if no run-off is
contributed, no fees will be due. And where fees may be applicable, they will be based on
proportional benefit from the system. In short, if implemented as recommended by the
consultant, stormwater fees will not be subject to the requirements of Proposition 218.
Policy Connections
The City has a long-standing policy of using fees to recover costs for activities that provide direct
benefits to the service recipient (or cost-driver). An example is the fee paid by the hazardous
material user that supports the CUPA program administered by the Fire Department. In the case
of the storm water, developed property generates some amount of runoff dependent on how it is
developed. Property that is more intensely developed with hard runoff generating surfaces has
more of a need to dispose of rainwater than property that is developed to contain and absorb
rainfall. Property with no development on it may still generate runoff in more or less amounts,
depending on the condition of the soil, vegetative cover and slopes. This is a natural condition
not caused by usage and, therefore, does not generate a need for this program. The consultant
recommends that fees developed to support a stormwater enterprise fund be based on the size of
the property's impervious area only. Impervious area includes the footprint of any structures on
the property as well as other "hardscape" uses such as paved driveways, walkways and parking
areas.
What Comes Next?
Assuming the Council authorizes staff to begin the process of establishing a stormwater
enterprise fund, we begin accounting for all costs related to storm drainage in this manner. A
consultant will be hired to give us the tools to fairly establish fees to charge our customers. This
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includes developing the necessary database for impervious area. The current feasibility study is
based on very rough, "order-of=magnitude" estimates. While we know the area of building
coverage on each parcel through our geographic information system, we do not currently have
data on other impervious areas such as paved driveways, walks and parking areas. If the City
decides to do a more accurate impervious area calculation, one that includes more than just
building footprints, there will be additional costs to determine the impervious area for each
parcel. We will also need to finalize plans for how to bill customers, whether via the tax roll or
utility billing system. Doing this work in a timely, cost-effective manner will require consultant
assistance. Costs for this will be presented to the Council as part of the 2001-03 Financial Plan
process.
CONCURRENCES
To receive public input, we held two advertised community meetings to discuss the NPDES
program and to ask the public how they thought the program should be funded. The first meeting
was held in November 2000 and the second in March 2001. Information was provided by a
combination of mailed notices, public advertisements, press releases and display ads in the local
newspaper. While neither program was well attended, the common response by those attending
was that the NPDES program seems to be a good one in meeting the City's environmental
stewardship goals. Comments regarding how the City should pay for the program were limited.
Some mentioned an increase in the transient occupancy tax as a possible option. (Note: if
earmarked for this program, this increase would require two-thirds voter approval.)
Presentations of the NPDES program were also made to the Architectural Review Commission
and the Planning Commission in March 2001. Both commissions felt the program was beneficial
but expressed concern about it being an unfunded mandate.
The Finance Department Director supports the recommended action.
FISCAL IMPACT
The fiscal impact of this program is significant. Currently, the City is expending about $322,000
in various departments to perform work that is similar to or would be duplicated by the program.
Additional work is done by the CUPA program that is supported by a fee program, and the Water
Conservation Program that is supported by the Water Utility. New expenditures of$251,000 per
year and the start up costs of $589,500 will also come out of the General Fund, unless the
Council establishes a new fee program to support it.
The NPDES program is heavily weighted towards personnel costs. The following table shows
the portion of the costs for staff and for supplies and equipment.
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Existing New Programs Total Start Up
Programs Costs
Personnel Hours 4282 3732 8014 720
-Materials/Supplies/Equipment $10,000 $16,000 $26,000 $225,750
Formation of a Storm Drain $125,000
tility
Additional hours of work will be divided between the Public Works Engineer Division, (1184
hours,) Public Works Streets Division, (480 hours,) and Community Development Building
Division, (800 hours.) In addition the consultant proposes a new '/i time position to administer
the program and perform many of the public relations, education and monitoring functions.
Finally, decisions about staffing will be made at a later time, as the program is further defined.
The consultant cost to form a stormwater drainage utility is estimated at $125,000 and would
come from the General Fund but could be repaid by a future Storm Water Enterprise Fund.
ALTERNATIVES
There is no alternative to compliance with the NPDES Phase II program requirements. The only
unknown at this time is the level of effort required of the City to comply. Failure to comply will
lead to fines and other penalties. The only unknown at this time is the extent of these
requirements.
More importantly, the program goal of cleaning-up our creeks is a desirable one that should be
supported by the City; and based on likely NPDES "best practices," we know that doing a better
job of protecting our environment will simply cost more. As such, the key policy question is:
how should we best fund modest efforts to improve our creeks? For example, for about $2.00
per month per family—less than the cost of a Big Mac—we can fund a significant commitment
to improving our local environment.
In summary, following the example of how we paid for new initiatives in improving sewer
treatment—and consistent with our existing Financial Plan policies for user fee cost recovery—
formation of stormwater enterprise fund is a reasonable funding option that is used by many
cities in California. On the other hand, if we fund future costs with general-purpose tax
revenues, the result will be a minimal NPDES program and lead to a reduction in core services
such as police, fire, street maintenance and parks & recreation.
ATTACHMENTS
1. Questa, "Storm Water Management Program-NPDES" Section 1
2. Black and Veatch, "Stormwater Financing Feasibility Study"-Executive Summary
Black and Veatch's and Questa Engineering's full reports are available in the Council Reading
File
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Attachment 1
Storm Water Management Program - NPDES
Program Requirements, Recommended Activities
and Approach,
Program Staffing, and
Estimated Costs
for
City of San Luis Obispo, California
Prepared for:
Mr. Wayne Peterson, P.E.
City of San Luis Obispo
Public Works Department
955 Morro Street
San Luis Obispo, CA 93401
January 9, 2001
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SECTION 1. OVERVIEW OF STORM WATER PHASE 1I PROGRAM
Water quality degradation is regulated nationally by the Federal Water Pollution Control
Act (also called the Clean Water Act [CWA]), which since 1972 regulates the discharge
of pollutants to waters of the United States from any point.source. In 1987 amendments to
the CWA added section 402(p) which established a framework for regulating non-point
source storm water discharges under the National Pollutant Discharge Elimination
System (NPDES) Program (Phase 1). The Phase I NPDES Storm Water Program
regulates stone water discharges from major industrial facilities, large and medium-sized
municipal separate storm sewer systems, and construction sites that disturb 5 or more
acres of land. In October 1999 the Environmental Protection Agency (EPA) finalized
revisions to the Water Pollution Control Program, implementing the Storm Water
Program Phase II Final Rule regulations. The Phase II Program expands its coverage to
include (1) regulated "small" municipal separate storm sewer systems (MS4s); (2)
construction activity resulting in disturbance of one to five acres of land; and (3)
municipally owned industrial facilities.
As defined by EPA, a small MS4 is any MS4 not already covered by the Phase I Storm
Water Program. A "regulated" small MS4 is one located within the boundaries of a
Bureau of Census-defined urbanized area. An "urbanized area" is a land area that has a
residential population of at least 50,000 and an overall population density of at least 1,000
people per square mile, or areas as identified by the Regional Water Quality Control
Boards. Urban portions of the City and County of San Luis Obispo within the San Luis
Obispo Creek watershed fall under this category, and must therefore comply with the
storm water Phase II Program. The boundaries of the MS4 will be set by the Regional
Board and will include the City and the County unincorporated areas surrounding the
City. The California Polytechnic State University at San Luis Obispo (Cal Poly) will
likely also be required to develop a Phase 11 Program, but could co-ordinate its activities
with the City and County.
Storm Water Piz ase II Program Goal and Objectives
As declared by the EPA, the goal of the Storm Water Program is (1) to protect the water
quality of the Nation's waterways by reducing the quantity of pollutants that storm water
picks up and carnes into storm sewer systems and natural surface drainage ways (such as
creeks, lakes, and estuaries) during storm events to the "maximum extent practicable,"
and (2) to satisfy the appropriate requirements of the Clean Water Act.
To meet this goal the Phase II Program requires small MS4s to develop, implement, and
enforce a storm water management program that includes six minimum control measures:
Questa Engineering
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1. Public education and outreach
z Public participationlinvolvement
3. Illicit discharge detection and elimination
4. Construction site runoff control
S. Post-construction runoff control
6. Pollution prevention/ good housekeeping for municipal
operations
The Program must include specific Best Management Practices (BMP) for each of the
above six minimum control measures and must define measurable goals for the control
measures. Best Management Practices for storm water management are defined as
schedules of activities, prohibitions of practices, maintenance procedures, the use of
pollution control devices and other management practices used to prevent or reduce the
amount of pollution introduced to receiving bodies of storm water runoff. Recommended
BMPs for each of the six minimum control measures are provided in Sections 2 through
7.
The "maximum extent practicable" standard requires the development and
implementation of BMPs and the achievement of measurable goals to satisfy each of the
six minimum control measures. Determining whether a BMP protects water quality to the
maximum extent practicable is subjective. The recommendations provided here are based
on our knowledge of what has been implemented and approved for other Phase I
municipalities, as well as a number of Phase II communities that have been particularly
pro-active in Program development and implementation. Therefore, we are confident that
the Program recommendations outlined in this report meet the maximum extent
practicable standard.
The "measurable goals" should reflect the specific needs and characteristics of the City
according to EPA guidelines. According to the Program guidelines,the measurable goals
do not necessarily have to be quantitative, but should be attainable and controllable. This
report does not include recommended measurable goals, as guidance on development of
measurable goals is to be provided by EPA by October 2001. After that time the City will
be better equipped to define specific measurable goals for the City Program.
Although most Phase I Programs included extensive water quality monitoring to gauge
progress in improving storm water quality, this aspect is not required by the EPA for
Phase II communities. None-the-less some water quality monitoring is recommended to
define the nature and extent of problems, and to assess the benefits of local Program
activities.
Milestones and Implementation Schedule
Important milestones for the development of the Storm Water Program are presented
below:
Questa Engineering
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January 2001: EPA is obligated to issue a menu of recommended BMPs for
MS4s.
October 2001: EPA is obligated to issue guidance on development of measurable
goals.
December 8, 2002: NPDES permitting authorities are required to issue general
permits of Phase II regulated small MS4s.
March 10, 2003: Operators of small MS4s are required to submit NOI to initiate
NPDES Phase H permitting coverage.
Based on the above milestones and on-going water quality and stormwater program
activities, the above dates are easily achievable, and the City can be considered to be
"ahead of the game"with respect to Phase II implementation.
Questa Engineering
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Anachment 2
NPDES Phase II
Stormwater Financial
Feasibility Study
City of San Luis Obispo
Prepared by:
BLACK & VEATCH
April 12, 2001
EXECUTIVE SUMMARY
The City of San Luis Obispo (City) is required to meet the United States Environmental
Protection Agency (EPA) National Pollutant Discharge Elimination System (NPDES)
Stormwater Phase I1 stormwater regulations covering agencies With populations greater than
10,000. These regulations require the City to conduct the following programs:
• Public Education and Outreach
• Public Involvement/Participation
• Illicit Discharge Detection and Elimination
• Construction Site Runoff Control
• Post-Construction Runoff Control, and
• Pollution Prevention/Good Housekeeping for Municipal Operations programs
The City, with assistance of Questa Engineering, has developed a formal stormwater program to
meet these requirements. Details of this program are provided in the report titled Storm Water
Management Program- NPDES Program Requirements, Recommended Activities and Approach,
Program Staffing and Estimated Costs (SWMP), dated January 9, 2001,by Questa Engineering.
The City currently provides stormwater related services including street sweeping, minimal storm
drain maintenance, annual inlet cleaning in the City Center, cross connections monitoring, and
construction site sedimentation monitoring. These activities are currently funded from General
Fund and Water Utility Fund revenues and totaled approximately $322,000 in FY 1999-2000.
The Water Utility administers a water conservation program that would provide benefits to the
stormwater program. The SWMP report has integrated these activities into the formal
stormwater program needed to meet NPDES Phase II requirements.
The estimated costs involved in establishing and implementing a formal stormwater program are
developed in the SWMP. These costs are in excess of the amount currently funded by the
General Fund and Water Utility Fund revenues. The issues the City needs to consider with
reference to the financial and organizational elements of the storniwater program are:
1. What is the best financing mechanism?
2. How should costs be recovered? Should the City's General Fund and Water Utility
Funds continue to fund the program?
3. If the City decides to establish user fees as a funding source, (i.e., establish a
stormwater utility) what is the best (fair and equitable) method to recover costs from
the users/properties in the City? How should customers be billed?
4. How should the stormwater utility be structured?
Black & Veatch
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5. How proactive should the City be in stormwater program development and
implementation?
These issues are discussed in detail in this report and summarized in this executive summary.
Background
The City is required to regulate stormwater discharges under EPA's Phase II program mandates.
The objective of this program is to implement specific Best Management Practices (BMP) to
prevent or reduce the amount of pollutant discharged to receiving waters such as the San Luis
Obispo Creek that flows through the City. EPA is obligated to issue guidelines on development
of measurable goals by October 2001. The measurable goals developed by the City should
reflect the specific needs and characteristics of the City. These goals do not necessarily have to
be quantitative but should be attainable and controllable. After EPA provides the guidelines for
these goals in October 2001, the City will be in a better position to define specific program goals.
By December 8, 2002, general permits will be issued for Phase II and the City will be required to
submit a Notice of Intent to initiate permit coverage by March 10, 2003..
Program Costs and Funding
There are two types of stormwater management program costs that typically need to be tracked-
capital and operating costs. The SWMP report currently identifies the purchase of a storm drain
cleaning truck for $150,000 in FY 2005-06 as the only major capital cost. The balance of the
program costs is mostly ongoing operating costs of setting up and implementing the program.
Fiscal Year Cost Total estimated program costs for implementing Phase II BMP
2000-01 $347,000 requirements are summarized and shown in the adjacent table. These
2001-02 $415,000 costs are based on the loaded hourly rates for staff to perform the
2002-03 $392,000 activities required for the proposed stormwater program. Program
2003-04 $581,000 costs in FY 2000-01 increased $25,000 from the previous year mainly
2004-05 $538,000 due to storm drain mapping efforts that began this year. It should be
2005-06 $587,000 noted that when measurable goals are defined later this year, the costs
of the program may have to be revised. In any case, as shown in the
table, the proposed costs of the program are expected to increase almost 50 percent from the
current levels over the next five years.
The City's General Fund is forecast to have limited resources to fund these additional stormwater
program costs because of the many other outstanding demands on it such as:
• Railroad Recreational Trial
• Downtown Transportation Center
• Open Space Preservation
• Athletic Fields
• Community/Senior Center
• Civic Building
Black& Veatch
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These projects cannot be funded through any user fee revenues, leaving General Funds as the
only likely funding resource. Thus, any additional funding needed for the stormwater program
above the current levels would probably not have priority from the General Fund.
We recommend the establishment of a stormwater enterprise fund so that the proposed
Phase II stormwater_program has the flexibility to be financed partially or fully by user fee
revenues. An independently funded stormwater program can free up funding for other "General
Fund" type projects including the projects shown above which are entirely dependent upon
General Funds. A parallel may be drawn with the Clean Water Program for wastewater
treatment that was initiated in the 1950s. A wastewater enterprise fund is now taken for granted.
The stormwater program may grow in similar fashion. Establishing a stormwater enterprise
would represent a proactive step on the part of the City to position itself strategically to respond
more efficiently to current and future stormwater issues and needs.
A 1998-99 Stormwater Utility Survey conducted by Black & Veatch showed that 37 percent of
the 112 respondents have formed separate stormwater utilities to address stormwater
management needs and meet state and federal regulatory requirements. Of the 112 stormwater
utilities surveyed, 82 percent of the respondents indicated that at least 90 percent of their revenue
is derived solely from stormwater fees while two percent of the respondents relied solely on other
(non-ad valorem assessments) for at least 90 percent of their revenue. The remaining 16 percent
of the respondents depend on multiple revenue sources to provide a major share of the total
revenue. The survey results can be found in Appendix B.
Should the City's General Fund and Water Utility Fund continue to fund stormwater
expenses in whole or in part and/or should the City establish a stormwater enterprise fund
supported by user revenues to supplement or replace those funding sources? It is
recommended that the City establish a stormwater enterprise fund and implement user fees to
support stormwater program efforts. Stormwater program expenses may initially be supported by
the City's General Fund and Water Utility Fund but user revenues should eventually fund the
entire program. A separate stormwater enterprise fund will provide a more stable revenue source
and dependence on unreliable General Fund revenues to fund stormwater program costs will no
longer be necessary.
If the City chooses to establish a stormwater enterprise fund, the City must decide how the
stormwater program will be funded. To assist the City, we have discussed and evaluated
different funding mechanisms and various user fee methods. Impacts on properties within the
City were estimated so that the decision makers can make informed judgments on whether to
continue to support the stormwater program from General Fund and Water Utility Fund revenues
or to establish an enterprise fund supported by user revenues, or a combination of both. These
funding mechanisms are discussed in the following section.
Funding Mechanisms
Black & Veatch
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Keeping in mind that the City's available General Fund resources are forecast to be limited,
alternative funding mechanisms for recovering stormwater program capital and operating costs
may provide some added financial security to the future stormwater program. Different
mechanisms are available for funding capital costs and operating costs for the stormwater
program. These are described briefly below and in more detail in the body of the report.
Capital Costs Recovery
Under the current NPDES Phase II program, anticipated capital costs in the near term are not
significant. However, the City does have several storm drain refurbishment projects totaling a
little over three quarters of a million dollars that need to be implemented over the next four years.
Also, as the stormwater management program develops, capital costs to repair, refurbish and
replace existing storm sewers and make improvements to the existing system including filtration
of stormwater may be needed. These costs may be significant and may be funded through long-
term debt. General Fund revenues can be used to fund capital costs if monies are available. New
development could be required to fund their share of capital costs for storm drain sewers or
detention basins through in-lieu of construction charges or impact fees. Since the City is close to
build out; limited revenues could be expected from new development. Although such fees offer
a means of recovering capital costs associated with growth, they are not a practical means of
financing the costs of improvements required to serve already developed areas.
Operating Costs
Ongoing operating costs may be funded either from General Fund revenues and/or the
establishment of stormwater utility user fees and other charges (e.g., plan review, inspection,
monitoring/testing, etc.). Typically, user fees provide a more stable revenue source than General
Fund revenues. Also, they offer a more fair and equitable means of recovering stormwater
management costs, whose proceeds are dedicated exclusively to this purpose. However, a
commitment of resources is required to ensure the establishment of a fair and equitable system of
user fees.
User Fee Methods
User fees must be related to the service requirements applicable to each customer or class of
customers. For stormwater programs, these services can be measured in terms of stormwater
quantity, quality, and customer costs. Quantity costs are those related to the volume of
stormwater generated. Quality costs are those costs that relate to the level of pollutants in runoff.
Customer costs are related to costs of billing and collecting user fees. There are no specific costs
at this time that are tied to the quality of the runoff and since the program is in its infancy, costs
for collection and billing are not identified or assigned. To simplify the allocation of stormwater
program costs, costs are allocated only by quantity of runoff. There are two primary methods for
levying user fees to recover ongoing operating costs. These are:
• Total impervious area. Because of its relationship to stormwater runoff and quantity, total
impervious area is frequently used as a basis for establishing stormwater user charges. This
Black & Veatch
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implicitly assumes that there is very little runoff from pervious areas or that the property is
not responsible for runoff from pervious areas since it would have occurred regardless of the
property's development. The City has available data on building footprint area that
contributes to total impervious area and could be used to determine runoff. Building
footprint data alone usually does not account for a property's total impervious area and
should be supplemented with additional data to show other impervious areas such as
driveways, parking lots and paved areas to increase equitability. Since total impervious area
data is very specific to each property it would establish a reasonable relationship or "rational
nexus" between the basis between the user charge and the costs incurred. This is required if
user fees are to pass the Proposition 218 test (see section below).
Class average area can be used to further simplify a total impervious area based user fee. An
average area can be defined for single family residential customers for example, and these
customers can be charged uniformly. Non-residential customers with varying impervious
areas would be charged according to the actual impervious area of each parcel. This method
when combined with total impervious area is recommended to address the City's needs and
minimize data collection efforts.
• Gross property area. This is an alternative parameter for estimating stormwater runoff
flows, when used in conjunction with runoff or intensity of development factors appropriate
to the type of development. Intensity of development factors are indicators of the relative
runoff potential from various classes of properties and are determined to represent gross
property area that is impervious. Runoff coefficients may recognize additional parameters
such as topography, soil characteristics, vegetative cover, etc. Gross property area data is
typically available from the tax assessor's database and the City currently has this
information. This is a simple system of charging users and is typically used when total
impervious data is not available or too costly to obtain.
Detailed descriptions of these two primary methods including other methods are presented in the
body of this report.
This brings us to the issue, "What is the best financing method for user fees assuming the
City chooses to establish a stormwater utility and implement user fees?" We recommend
using the total impervious area method since this method provides greater equity than the
gross area method. The City currently has building or footprint data that can be used to initially
develop the database for charges under this system. This data can be improved to include all
impervious areas such as paved areas, driveways and parking areas. This requires additional time
and effort to collect the data but will be worthwhile in the long run, as it provides greater equity
and flexibility to design a system that meets regulatory requirements and can withstand
Proposition 218 challenges. However, the economics of developing this database of total
impervious area needs to be investigated further and compared with using gross area with runoff
factors. The use of class averages can further simplify these methods and perhaps minimize
database development efforts.
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The example on the following page shows that revenues of$398,000 can be collected by levying
an average monthly fee of$1 for single family residential customers and a proportionate amount
from multi-family and non-residential customers using building footprint area. This example is
based on building footprint area since the City does not currently have additional data on total
impervious area for each parcel. This example shows that a relatively small fee can generate
revenues to offset a significant portion of the costs of stormwater operations.
Example Rates Based on $1.00 Monthly Charge to SFR for Stormwater Charges
Method Average onthly Cost Per Parcel Total Costs Unit Rates
Single Multifamily Non- City's Share
Family Residential residential for Streets
Residential
Impervious $1.00 $0.84 $1.88 $153,285 48.60 per
Area and Class month per
Average 1000 sq. ft
Average area 2,057 sq. ft. 1,729 sq. ft. 3,861 sq.ft.
These rates will change according to the amount the City would like to generate initially from
user fees. Note that the City's contribution is based on the City's share of costs for streets and
roads owned by the City. Public buildings were not identified separately in the initial database of
records, but once this data is sorted out, charges to City buildings will increase the City's
contribution to the stormwater program. This leads to the issue "How much should the City
contribute towards stormwater costs.above and beyond their contribution for streets and
City owned properties?"
• Should the City fund the entire stormwater program costs through the General Fund, or
should the City continue to fund the stormwater expenses at the current levels thereby
reducing charges to users?
• Should the City only pay for costs incurred by streets and City owned properties, or should
the City bear any costs at all?
• Should the City provide some level of funding in between the two extremes?
The City may pay its share of stormwater program costs like any other user in the City.
The City could participate in the program and pay for stormwater runoff from streets as shown
above. As data on public buildings are identified, the City could also pay for stormwater
generated by City owned properties. In addition, the City may wish to use General Funds to
contribute towards the program to minimize impacts.to the users initially. We recommend
that the City consider starting the user charges at a nominal level of at least $1 per month for an
average single family residence. This is a very nominal fee and small annual increases will allow
the General Fund to reduce its contribution to the stormwater program over time. Fees may be
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gradually increased each year until the fees collected from users (including the City payment for
streets) fully pay for the stormwater program.
Institutional Issues
There are two different issues that need to be addressed in addition to financing the stormwater
program costs: Billing and Organization/Administration. How should customers be billed and
what is required to set up the billing? How should the City administer stormwater program
efforts that will complement the development and maintenance of a stormwater utility?
Billing
Assuming that the City decides to implement user charges, the issue is "How should billing be
implemented?" There are two options that are discussed in greater detail in the body of the
report:
• Billing on the County Tax Roll. Charges would be levied semi-annually to property owners
on the property tax bills. This is fairly cost-efficient and typically results in the lowest
delinquencies. The County may charge the City a nominal amount to collect stormwater
charges on the County tax roll. The drawback is that when charges are put on the tax roll,
there is a misconception that they are a tax and therefore subject to Proposition 218.
• Combine bills with water/wastewater utility. Charges would be levied bi-monthly to water
and wastewater users as opposed to property owners. This is relatively simple since the City
is already billing users for water and wastewater services. The City may expect some
customer relations issues as a result of"bill creep." Vacant properties, (approximately five
percent) which are currently not billed for water and wastewater services, would escape
without paying for stormwater charges unless modifications are made to the billing system to
always .bill for stormwater service. Without this change to always bill for stormwater
charges, about five percent of the revenues from stormwater user fees would be lost. In
setting up the database to levy stormwater fees along with water and wastewater bills,
problems occur when the customer base is not the same. For example, parking lots may not
have water service. Significant effort may be required to link water accounts to property
records.
Since the City is already billing for utility services, we recommend that the City institute
stormwater billing along with water/wastewater bills. This will require a one time set up cost
to integrate the water use records with property records and data for stormwater billing. The City
would receive user fees throughout the year, which mitigates cash flow problems and the City
would not have to make payments to the County for collection of stormwater user fees on the
County tax roll.
Organization/Administration
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Stormwater operations are administered under a variety of organizational structures. The most
common organization includes combining the stormwater operations with Public Works by
establishing a stormwater division operated as an enterprise fund, with the majority of revenues
derived from user fees.
Other organization structures could include combining with Wastewater, a division of the Utility
Department. It could be a part of the Wastewater Division or a separate division of the Utility
Department, or a division of the Public Works Department. Since the various elements of this
program will be operated across department lines-Community Department, Public Works,
Engineering, and the Utility Department, any of these options is feasible.
The ultimate decision of organizational structure is, however, one to be made by the City Council
after review and input from City staff.
Proposition 218
If the City chooses to charge users a stormwater fee to recover the costs of the stormwater
program, Proposition 218issues need to be considered. Proposition 218 applies to fees and
charges imposed by an agency.upon a parcel or upon a person, incident on property ownership,
including a user fee or charge for a property related service. Proposition 218 requires stringent
public hearing requirements and requires that the fee or charge may not be imposed if written
protests are presented by a majority of the owners of the parcels.
If the stormwater fee is set up on total impervious area or gross area with intensity of
development and runoff factors in the manner recommended, it will not be incident on property
ownership because the fee would. be related to stormwater service provided and undeveloped
parcels would not be charged. This should mitigate the concerns regarding Proposition 218.
Even though it is clearly not a property related fee, levying stormwater user fees on the tax roll
may be perceived as such and become a Proposition 218 issue. The City needs to consider this
risk in its decision for collection of stormwater user fees should a stormwater utility be
established.
Community Input
One of the issues identified during our public meetings is that the community feels strongly about
reducing pollution and maintaining a high quality of life for its members. Our recommendations
to form a separate stormwater enterprise fund and a separate stormwater division resulted partly
from this input received from the community. The community wants to be proactive in cleaning
up and maintaining a good environment and even go beyond the regulatory requirements to
initiate and conduct the stormwater program. The City may want to develop a program that goes
beyond the current regulatory requirements.
Community members expressed interest in increasing the Transient Occupancy Tax to pay fully
or partially for the stormwater program. Since this is a tax, the City would need to obtain
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majority voter approval to use this method of funding. Since this cost is not borne by the local
community, such a measure would be popular with the majority of the commui '
fairness of this approach may be questionable since the majority of the l Attachment 2
associated with this program are local in origin and would certainly be opposed by the
hotel/motel industry.
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