AGENDA #15
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Development and Implementation of a Town Stormwater Utility
DATE: June 24, 2002
The Council reviewed and discussed at its June 12 work session the attached report on the establishment of a stormwater utility. We believe that a utility would provide a stable revenue source for a comprehensive stormwater management program to meet current and future community needs and requirements.
Because of budget constraints, we recommend deferring consideration of this matter until the fall, by which time we expect to have greater certainty about State actions affecting local revenues. At present, we could not produce sufficient funds to underwrite the estimated $490,000 expenditure that would be required to carry out the proposal, except by imprudent depletion of the General Fund balance.
BACKGROUND
A stormwater utility can provide an alternative to property-tax-supported (General Fund) stormwater management programs. As such, a public stormwater utility functions similarly to a conventional water and wastewater utility. Service fees and/or user charges are levied by the utility and subsequent resultant revenues are dedicated to funding the services provided. In the case of a stormwater utility, those services would include operation, management, improvement and implementation of required compliance measures relating to all aspects of stormwater quality and quantity management. State enabling legislation grants authority to local governments to establish stormwater utilities.
In response to recommendations of the Stormwater Utility Development and Implementation Study Committee, the Council authorized the Manager in February, 2002 to enter into a professional services contract for the preparation of a pro forma business plan regarding the development and implementation of a local stormwater utility to serve as a revenue source for the Town’s stormwater management program.
On June 12, 2002, AMEC Earth & Environmental presented to the Council a draft pro forma business plan that outlines the key elements of a proposed stormwater utility and a recommended process for utility development and implementation.
The final stormwater utility pro forma business plan is presented tonight for the Council’s information.
DISCUSSION
The pro-forma business plan report provides basic information about a stormwater utility. It represents the first in a two-step process for developing and implementing a utility-based stormwater management program in Chapel Hill.
The following key issues and elements of a local stormwater utility are further discussed in the pro-forma business plan:
1. What can a stormwater utility do for the Town that is not already being done?
A stormwater utility could provide a stable source of revenue to finance desired and required stormwater management programs and services. These revenues could supplement or replace general funds currently used for stormwater management operational and maintenance needs. Our stormwater management services are limited because of funding constraints, and we expect that future State and federal mandates will further challenge our ability to adequately respond to community stormwater management needs.
Existing program needs include drainage capital improvements, drainage maintenance, drainage assistance program, water quality sampling, data management, stream and riparian buffer assessments, illicit discharge identification and elimination, and mapping of floodplains/Resource Conservation Districts/storm drain system. If the Council decides to proceed with development and implementation of a local stormwater utility, it would need to make a series of policy decisions identifying the types and levels of services that the program would provide, and upon which the utility rate structure would be based.
2. What would the organizational structure of the utility look like?
We would not anticipate significant changes in the Town’s organizational structure to accommodate a stormwater utility. The current structure places primary responsibility on the Town Public Works and Engineering Departments for stormwater management designs, operations, and maintenance. Depending on the Council’s policy decisions and future State and Federal mandates, additional staff and equipment resources may be necessary to meet new or expanded service requirements. These resources could be provided by utility revenues. It would be our intention to keep overhead costs as low as possible and to maximize use of available funds and other resources for infrastructure improvements and stormwater management services.
We note that OWASA is authorized to provide stormwater management services and that one option for consideration by the Council would be to negotiate with OWASA for operation of a stormwater management utility. The Council would need to consider the governance issues that would arise under such an arrangement, as well as coordination with Town services.
3. How would utility revenue be generated?
We would expect the utility rate structure to be based on the stormwater impacts associated with properties in Chapel Hill. The most commonly used method establishes the utility fee rate based on the amount of impervious surface covering each property parcel. A cost would be established for a unit area of impervious surface (e.g. 2500 square feet) which would establish the multiplier basis for the utility rate. The monthly utility charge per property would be calculated by dividing the total impervious surface area of a property parcel by the unit area (2500 square feet) and multiplying by the unit fee rate.
Stormwater utility rates in the United States generally range from $2.50 – 4.50 per unit (e.g. 2500 square feet) of impervious surface. A typical residential lot would be one unit of impervious surface. A program budget and cash flow analysis would be developed for the Council’s review and approval before adopting an ordinance setting the utility rate.
4. How would the funds be collected?
The funds would be collected through a standard utility billing system. Because the Town does not own or operate any utilities, we do not have a monthly billing system in place. Rather than creating a Town-administered billing system, we think that it might be possible to contract OWASA for use of their established system. A line item for stormwater could be added to the water and sewer bills for Chapel Hill property owners and residents. The stormwater utility would pay OWASA fair and reasonable costs for the billing services provided. Funds collected each month would be transferred into the stormwater utility revenue account established by the Town.
Alternatively, the Town could hire a billing service provider and pay for the service with utility revenues.
NEXT STEPS
Because of the complex set of issues involved in establishing a stormwater utility, and the need for identifying a variety of associated policies and advising the Council in making policy decisions, we need the services of a consulting firm with experience in developing and implementing stormwater utilities.
The estimated cost for a professional services contract with AMEC Earth & Environmental for the development and implementation of a stormwater utility is $490,000. This figure could be reduced by approximately $150,000 if new aerial photography can be financed through the Town Capital Improvements Program. We expect to have an answer to this question by July 26, when the Council is scheduled to adopt a final budget. If the State enacts legislation necessary to protect local funds from actions by the Governor, the aerial photography project can be added to the Capital Improvements Program. The final cost of consultant services would be subject to contract negotiation if the Council decides to proceed as outlined in the pro-forma business plan. These services would be provided over a period of 20-24 months.
Because of budget constraints, we recommend deferring consideration of this matter until the fall, by which time we expect to have greater certainty about State actions affecting local revenues. At present, we believe that we could not produce sufficient funds to underwrite the estimated $490,000 expenditure that would be required to carry out the proposal, except by imprudent depletion of the General Fund balance.
ATTACHMENTS
1. Pro-forma Business Plan Report for a Utility-based Stormwater Management Program in Chapel Hill (begin new page 1).