St. Petersburg, Florida, moved from a "one-size fits all approach" to storm water utility to a tiered-rate structure system.
When One Size Fits All No Longer Fits
From changing storm water regulations and urban sprawl to increased storm activity and flooding, municipalities across the United States already have plenty of water-related headaches. Add aging infrastructure to the mix, and you have the perfect storm. And with no slowdown expected in the population, impervious surfaces will continue to rise. Treating storm water management responsibility as both a physical — and financial — resource is going to be crucial.
While many communities across the country have established storm water utilities, many more do not and may be unsure of how or where to begin — and how to justify these utilities to the public. As storm water utilities continue to grow in popularity, the more mature organizations are becoming adept at capturing these negative externalities and incorporating a fee structure that ideally curbs non-resilient behavior, or at least collects fees when it does not. Even better, the most well-run storm water utilities are incentivizing more responsible behavior and investing in systems that will continue to perform well over the long term.
St. Petersburg Stormwater User Fee Evolution
The city of St. Petersburg, Florida, currently owns and operates an extensive Storm Water Management System that provides services within city limits. Management includes essential planning, engineering, design, construction, operations, maintenance, inspection, permitting and enforcement activities that manage storm water quantity and quality. Each of these activities are critical to mitigate flooding, protect individual and personal property, manage the water quality of receiving waters and comply with federal, state and local regulatory requirements.
Since the 1990s, the city’s storm water utility has generated revenues from storm water user fees. The city had used a "one-size-fits-all" approach to charging residential customers for storm water service since its inception. While charging the same fee for all residential parcels had limited the complexity of administration, key stakeholders within the city expressed concern over the fairness and equity of the approach. At the same time, the city council was asking for ways to incentivize green infrastructure to reduce the volume of storm water entering Tampa Bay.
A New Day
To accomplish this, multiple innovative solutions were needed to create a transparent, equitable recovery of increasing storm water management costs and successfully engage citizens in the process. A new statistically-sound tiered rate structure for residential customers was required, as was a menu of green infrastructure options to address the council's desire to offer a robust credit and incentive program. The development of a Stormwater Review and Appeals Portal where customers could review their impervious area and billing tier in advance of rate adoption was a top priority to convey transparency and fairness to the community.
There were several challenges that precipitated this comprehensive review of the city's storm water fee approach and underlying data: (1) impervious area measurements were mostly collected in 1989 and were not representative of current conditions; (2) revenue requirements increased due to capital projects needed to address flooding and water quality issues; (3) current flat rate fee structure for residential properties reduced equity between residential parcels with large variation of impervious area; and 4) non-single family residential parcels were charged on their impervious surface area measurement.
Knowing the challenges that lay ahead, Stantec and the city outlined the following key objectives:
- Digitally map impervious area for all parcels in the city limits to establish a master Geographical Information System (GIS) and calculate impervious area;
- Perform a revenue sufficiency analysis including a ten-year financial management program;
- Develop a cost of service analysis to allow development of new rates by customer class;
- Develop a tiered rate structure and updated fee calculation methodology;
- Integrate utility billing system with updated impervious area; and
- Update the Stormwater Mitigation Credit Program to recognize onsite storm water management systems and incentivize green infrastructure.
Gray or Green, that was the big question
Prior to developing a more equitable rate structure, implementation of city-wide single-family residential parcel's (SFRP) impervious area data by parcel was needed. In most cases, impervious surface area for non-SFRP was based on measurements calculated in 1989.
With such a gap in time since the most recent measurement of impervious area, multiple sets of data were pulled, produced and analyzed. In order to create a city-wide database for each parcel, this analysis measured both single-family and non-single-family parcels. Unfortunately, the previous direct measurements that would be comparable to the new raw measurements were not available. However, a comparison between the total area effectively billed in Fiscal Year 2018 and the newly measured impervious area was possible.
What was found? New measurements showed 14% or 55 million sq. ft. more impervious area had been measured than was being billed. These differences ranged from minor updates for parcels relatively unchanged over time to very large differences where parcels have had large additions or subtractions of impervious areas.
The Importance of Syncing Future Needs to Future Rates
The next step in the city’s storm water management evolution was a detailed revenue sufficiency analysis (RSA) to evaluate the sufficiency of current storm water rate revenues over a multi-year projection period and provide the basis for a plan of annual rate revenue adjustments necessary to satisfy all financial requirements identified during the projection period from Fiscal Year 2020 through FY 2029. To continue to serve the community, many facets of growth were looked at including:
- Operating and maintenance costs;
- Capital improvement program costs;
- Existing and new debt service expenses and corresponding net income to debt service coverage ratios; and
- Adequate operating reserves.
The city had anticipated borrowing $2 million in Fiscal Year 2020 with additional debt needed in future years to support capital needs. As such, the RSA identified the need for an increase in storm water revenues of 9% in FY 2020 to satisfy the identified cost of service. The detailed cost of service and revenue requirement results from the RSA were used as the basis of the storm water fee and credit/incentive programs calculated.
Two separate fee structures were recommended for SFRP and Non-SFRP. A tiered fee structure was recommended for SFRP which provided simplicity, while recognizing impervious area differentials. See Figure 1 for a distribution of tier breakpoints. Tiers allowed the city to recognize differentials in SFRP impervious areas that are of statistical importance and provide administratively efficient price signals across more than 75,000 individual parcels. A four-tier configuration was created and provides equity to customer classes over the current fee structure.
Configuring the tier breakpoints based on statistical distribution ensures the tier break points fit the property data and were not arbitrary and capricious. A parcel-specific fee structure was recommended for Non-SFRP. This approach ensured that each parcel's unique impervious footprint is accounted for and the fee levied is proportional, given the wide array of parcel configurations in this customer class.
Next, a review of the city's existing Rainwater Rebate program was performed to identify opportunities to encourage installation of green infrastructure. To determine the appropriate monetary value of the storm water fee credit or incentive, it was first necessary to estimate the reduced costs incurred by the city as a result of the property owner's on-site management activities. A cost of service analysis looked at base costs vs. quality and quantity costs.
The city decided to update their policy by offering credits for storm water management systems and parcels that discharge directly to tidal water basins. A storm water incentive – a one-time rebate towards the purchase and installation of qualifying green infrastructure – was given to those updates that will provide an annual benefit to the city's stormwater management utility over the life of the infrastructure. Rain barrels, rain totes and rain gardens were approved as items a homeowner could claim a rebate. The values of the incentives were developed based on the potential reduction in costs associated with reduced storm water contributions from parcels implementing the control activities.
Lessons Learned from Customer Engagement
This new storm water fee structure needed to not only be easy for the community to administer, but more importantly, easy for the community to understand. Once the tiered rate structure was developed, extensive public outreach was performed to inform the public about the new tiered system, share ways property owners could review their impervious area and address concerns regarding the new methodology before new rates became effective. Multiple mechanisms were used to advertise six public meetings including the city’s social media pages, billboards, the city’s website, neighborhood meetings and the neighborhood app Nextdoor. A thorough web portal was designed to allow citizens to easily review their impervious area, see frequently asked questions and submit an appeal, comment or question.
In the end, this successful collaboration between Stantec and the city resulted in adoption of a new rate structure and credit policies that went into effect on Oct. 1, 2019. The newly modernized SFRP fee structure will serve to enhance equity by recognizing impervious area differentials across the single-family residential parcels.