Feb 11, 2020

Florida City Switches Storm Water Fee Structure

St. Petersburg, Florida, shifted from a "one-size-fits-all storm" water fee to a tiered-rate structure. 

storm fee

From changing storm water regulations and urban sprawl to increased storm activity and flooding, municipalities across the U.S. already have plenty of water-related headaches. Add aging infrastructure to the mix, and you have the perfect storm. Impervious surfaces will continue to rise. Treating storm water management responsibility as both a physical and financial resource is 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, more organizations are becoming adept at capturing these negative externalities and incorporating a fee structure that curbs non-resilient behavior or at least collects fees when it does not. 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 Storm Water 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 services since its inception. While charging the same fee for all residential parcels had limited the complexity of administration, 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.

storm water system
Properties A and B have different impacts on the storm water system but had been funded at the same level prior to new storm water fees introduced in 2019.
storm water management
The first figure is an example of the Appeals Dashboard from the city side to track the number of appeals, who the appeal is assigned to and the status of each appeal. The figure below shows the SFRP Impervious Area Distribution.

storm water structure

A New Day

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 along with 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. There were several challenges that precipitated this 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.

Stantec and the city outlined the following objectives: 

  1. Digitally map impervious area for all parcels in the city limits to establish a master Geographical Information System (GIS) and calculate impervious area;
  2. Perform a revenue sufficiency analysis, including a 10-year financial management program; 
  3. Develop a cost of service analysis to allow development of new rates by customer class; 
  4. Develop a tiered-rate structure and updated fee calculation methodology;
  5. 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  

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, 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 large differences where parcels have had large additions or subtractions of impervious area. 

The Importance of Syncing Future Needs to Future Rates

The next step in the city’s storm water management evolution was a revenue sufficiency analysis (RSA) to evaluate 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 from Fiscal Year 2020 through 2029. Many facets of growth were looked at including: 

  1. Operating and maintenance costs; 
  2. Capital improvement program costs; 
  3. Existing and new debt service expenses and corresponding net income to debt service coverage ratios; and 
  4. Adequate operating reserves. 

The city 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 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. Tiers allowed the city to recognize differentials in SFRP impervious area which 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 structure.

Going Greener

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 necessary to estimate the reduced costs incurred as a result of the property owner's onsite management activities. A cost of service analysis looked at base costs versus quality and quantity costs.

The city updated its 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 storm water management utility over the life of the infrastructure. Rain barrels, rain totes and rain gardens were approved as these items. 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 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 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 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.  

About the author

Kelly Westover is managing consultant for Stantec. Westover can be reached at [email protected]. Andrew Burnham is vice president & director of Financial Management Consulting for Stantec. Burnham can be reached at andrew.burnham
@stantec.com

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