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Paying For Cleaner Water

Excerpt from Justin's September Newsletter

Some of the efforts that a municipal government works on see quick results. Some efforts take a few years. Our efforts to achieve cleaner waterways will take decades, but the payoff will be for multiple future generations. The efforts are on-going and constant. The improvements continue nonetheless.

Early in the last Council term, the members grappled with the challenges that the City faced from Federal environmental regulations that govern how we handle sewage from homes and businesses. Those efforts culminated in the adoption of the City's Sanitary Sewer Master Plan.

A few months ago, I wrote about our challenges in addressing the Combined Sewer System (CSS) which serves Old Town.

Our federal obligations for cleaner water do not end with waste water. The City also has significant obligations to protect waterways from polluted storm water. The City's MS4 Permit Program spells out specific pollutant reductions that the City must meet over a 15 year time period.

There are a variety of ways the City can meet these obligations. Redevelopment can help, in that it can convert impervious surfaces into areas that can handle stormwater. For example, a residential project in the Eisenhower Valley that was approved by Council in 2013 has created a new pond. That pond alone will account for a substantial portion of our pollutant reduction obligations until 2018.

In the end, meeting these obligations will be expensive. Current estimates have the costs at $65 - $100 million dollars over the next 15 years, including $33 million over the next five years.

In 2008, the City Council appointed a citizen group to review the costs and funding mechanisms available to address the City's responsibilities. In the spring of 2010, one of the City's previous City Managers proposed the creation of a Stormwater Utility Fee to fund these obligations.

As proposed in 2010, the fee would apply to all property owners (regardless of their taxable status) and be assessed based on the impervious surfaces on their property. Essentially the fee would be structured to be a user fee for the City's stormwater handling.

In adopting the budget in 2010, the Council instead chose to simply raise the real estate tax and dedicate a portion (a half cent) of the rate to stormwater projects. Essentially, the decision was to fund stormwater management based on the value of properties rather than the amount of stormwater runoff they create.

That funding has proven insufficient to cover the City's obligations. Based on the staff's current projections, the City will need to spend an additional 1.27 cents beyond the dedication, for a total of 1.77 cents on the City's current real estate tax rate. Ultimately, to address our obligations, annual spending will need to rise to $6.67 million per year. To address this mandate in later years, the annual spending will need to be even higher.

In December of 2014, the Council first discussed these obligations and the possibility of using a Stormwater Utility Fee instead of the existing real estate tax dedication.

Alternatively, the Council could increase the real estate tax dedication to continue funding these costs using that mechanism.

There are pluses and minuses of both approaches.

With the current real estate tax funding approach, 58% of the costs are today paid by residential tax payers and 42% by non-residential tax payers. Yet stormwater runoff is caused by impervious areas. The distribution of impervious areas is 63% non-residential property and 37% residential.

Funded as a component of the real estate tax, it is tax deductible on federal and state income taxes.

In February of this year, the Council again reviewed this issue and gave our staff the direction to pursue a Stormwater Utility Fee in lieu of the existing real estate tax dedication.

With a Stormwater Utility Fee, the cost burden would shift. Residential fee-payers would pay 37% of the stormwater costs and non-residential fee-payers would pay 63% of these costs.

For many property owners, this will reduce their cost. This will also require non-taxable property owners (places of worship and non-profit properties primarily) to cover their impacts on the City's stormwater system.

The fee would be assessed on the impact the property has on stormwater runoff in the City as opposed to simply the valuation of the property.

For residential properties, our staff will be proposing a relatively simple tier structure with different tiers for different types of residential properties. For non-residential properties, a calculation based on impervious areas on a property will be proposed.

They will also propose a series of available credits for fee-payers based on actions property owners can take to reduce their impact on the City's stormwater system.

This fall, our staff will be beginning a series of public engagement efforts to educate the community on this proposal. Later in the fall, the formal proposal will be brought to the Council for our first action to implement this new mechanism.

It is proposed that the first billing under this new funding structure be made in 2018 if the Stormwater Utility is approved by the City Council as part of our Fiscal Year 2018 budget.

Let me know your thoughts as we explore this change.


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