Funding Resiliency Through Unique Stormwater Fees

CASE STUDY: FORT LAUDERDALE, FL STORMWATER USER FEES A successful collaboration between Stantec and the City of Fort Lauderdale resulted in adoption of a new stormwater fee structure that represents an innovation in the apportionment of stormwater cost to parcels in relation to the benefit of services received. Passing all required legal tests in 2022, it will provide resources for the City to enhance the resiliency of its stormwater systems in light of a changing climate. The project included a detailed revenue sufficiency analysis to evaluate stormwater rate revenue needs over a multi-year projection period, cost allocation effort and fee design, as well as robust stakeholder engagement. STORMWATER USER FEES: A PROGRAMMATIC APPROACH For coastal cities ' especially those on the gulf and south Atlantic ' hurricanes, tropical storms, and heavy rains are part of a resident's everyday weather vocabulary. Many areas are experiencing weather extremes ' record high and low temperatures, more frequent flooding and droughts, and larger storms. No matter the location, events like these place constraints on municipal flood control systems, cause erosion, and disrupt fragile ecosystems essential to healthy waterfront living. Add in aging infrastructure, urban sprawl, and changing stormwater regulations and you've got water-related pain points for any city management team. Without a dedicated funding source, it becomes difficult to manage stormwater and even more difficult to do so proactively. Many communities have begun looking for ways to fund new systems and improvements to existing ones. Historically, funding for stormwater programs has come from property taxes, but it's not a perfect system. This has led some municipalities to establish a stormwater utility that incorporates charging a separate stormwater fee. These communities recognize that an organized approach to stormwater allows for proactive management of the system, provides an increased level of service, and addresses aging infrastructure. A dedicated funding source makes future planning possible. Doing so equitably from a fee perspective, however, doesn't have to be challenging. STORMWATER USER FEE DEVELOPMENT Fort Lauderdale is known as the 'Venice of the Americas' for its coastal proximity and extensive canal systems. In the face of rising sea levels, this presents a key challenge as the community looks to adapt and become more resilient to changes in the environment. Doing so requires generational investments in stormwater infrastructure. The first group of which was set to occur in Fiscal Year 2021 and cost $200M. These investments would provide stormwater pump stations and new passive systems in the most vulnerable neighborhoods. The City has had a stormwater utility and fee since the early 1990s. Over time, periodic adjustments to the fee have been made to generate more revenue ' although the fundamental structure has remained the same. To build consensus in the community for a new approach, the City undertook a multi- year effort to raise awareness, define the critical issues, and ultimately enact a stormwater fee structure to provide the resources needed to meet the community issues head on. The first component of this study was to perform a revenue sufficiency model in which all projected cost requirements of the utility are calculated year-by-year, then a plan for the rate adjustments necessary to support the expenditures was devised. In the case of Fort Lauderdale, the City needed 54% more revenue in the next fiscal year to satisfy their near-term capital and debt service needs. This presented a significant challenge and precipitated the next step in the analysis, which looked at the metrics used to assign cost to parcels that benefit from the stormwater program. Impervious area or gross area of the parcels served are commonly used as a basis for stormwater fees. The Fort Lauderdale stormwater utility used impervious area. However, as each city is different, it is often prudent to consider the options and alternatives that best match the underlying developmental characteristics of the community to make this decision. INNOVATIVE, AFFORDABLE, AND MOST IMPORTANT, EQUITABLE Fort Lauderdale's stormwater issues were being acutely felt in the roadways, with much of the utility's efforts going into keeping roads unblocked and passible. As part of a tiered hybrid rate structure, Stantec determined that a trip generation rate would reflect the estimate of a given parcels' roadway utilization. Exploring the link between motor vehicles and water quality degradation would better (and more equitably) connect the cost of service and the underlying cost of managing stormwater with the unique benefit that each parcel receives. Using the Institute of Transportation Engineers (ITE) survey data, the trip rate component is based on ITE traffic calculations reflecting the average usage for a given parcel type. For instance, a single- family home has 9.44 trips per day on average. This number was then multiplied by a cost per trip to determine a component of the new stormwater fee for each parcel. Trip generation rates were used to recover 20% of the overall revenue requirement. Given the substantial amount of cost and acute organizational focus on keeping roads clear and passible, this had the desired effect of distributing the utility's cost more in proportion to the benefit conveyed to parcels. The remainder of the cost (80%) was recovered in conventional impervious area-based fees. Applying trip generation rates to stacked vertical development such as condos enhances equity as it requires those customers to pay for their beneficial use of the roadway system. A key component of the study was ensuring that the fee could meet all legal requirements. This was especially important given that the City was transitioning from stormwater being billed on a monthly utility bill to an annual non ad valoerm special assessment. Additionally, the innovative form of the fee structure was one the City didn't want to take chances. To validate the fee, the City went through the bond validation process by which the City sued itself and the judicial system made a ruling as to the validity of new fee and the City's ability to impose it. This effectively set a judicial precedent and ensured that the City could use the revenue source to bond against. Given the magnitude of the investments contemplated in the study ' $200M in 2020 and an additional $200M five years later ' the ability to access credit markets was of paramount importance. Ensuring that the stormwater fees placed into service would meet the applicable legal tests was factored into each step of the analysis. LESSONS LEARNED FROM CUSTOMER ENGAGEMENT The new stormwater fee structure needed to not only be easy for the community to administer, but more importantly, easy for the community to understand. Once the new fee was developed, extensive public outreach was performed to inform the public about the new trip component, share ways property owners could review their assessment, and address concerns regarding the new methodology before the new fees became effective. Multiple mechanisms were used to advertise six public meetings, including the City's social media pages, City website, neighborhood meetings, and the neighborhood app Nextdoor. A very thorough web portal was designed to allow citizens to easily review their billed units and review frequently asked questions. In the end, this successful collaboration between Stantec and the City resulted in adoption of a new fee structure with credit policies. The newly modernized stormwater fee structure enhances equity by recognizing the full benefit of service that parcels receive. While stormwater management can be costly, it is a necessary investment. Stormwater utilities are becoming increasingly vital for communities to have a dedicated funding source for proactive management and the financial responsibility can be distributed fairly.