Evolution of Stormwater Utility Funding in St. Petersburg

The number of communities in the United States that have established stormwater utilities continues to experience steady growth. As stormwater management increases in complexity, localities are realizing that a dedicated funding source and equitable recovery of costs from within the community are essential for sustainable management of stormwater. The City of St. Petersburg, FL (City) has maintained a stormwater utility with revenues generated from user fees, based upon the amount of impervious surface area measured on each utility customer's parcel, The City has used a 'one-size-fits-all' approach to charging residential customers for stormwater service since its inception. While charging the same fee for all residential parcels has limited the complexity and administration, key stakeholders within the City expressed concern over the fairness and equity of the approach. City Council was asking for ways to incentivize green infrastructure to reduce the volume of stormwater entering Tampa Bay. Stantec assisted with the evolution of the City's stormwater utility by creating a statistically sound tiered rate structure for residential customers thereby increasing equity. A menu of green infrastructure options based on a cost of service analysis was created to address the Council's desire to offer a credit and incentive program. Since transparency and fairness were a priority for Council, Stantec helped develop a Stormwater Review and Appeals Portal to allow customers to review impervious area and billing tier in advance of rate adoption. This was a successful collaboration between Stantec and the City which resulted in adoption of a new rate structure and credit policies.
There are several challenges that precipitated this comprehensive review of the City's current stormwater 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 CIPs needed to address flooding and water quality issues; (3) current flat rate fee structure for residential properties reduces 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.
The City outlined the following key objectives: 1) Digitally map impervious area for all parcels in the City limits to establish a master Geographical Information System (GIS) and analyze and calculate area; 2) Revenue Sufficiency Analysis including a ten-year financial management program; 3) Cost of Service Analysis to allow development of new rates by customer class; 4) Develop a tiered rate structure and update fee calculation methodology; 5) Integrate utility billing system with updated impervious area; and 6) Update the Stormwater Mitigation Credit Program to recognize onsite stormwater management systems and incentivize green infrastructure.
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. Impervious surface area for non-SFRP was based on measurements calculated in 1989 (in most cases). Stantec utilized existing high-resolution aerial imagery and GIS image classification techniques to create a geodatabase with an estimate of current impervious area by parcel for the City limits. Stantec explored a modernization of the SFRP fee structure that will serve to enhance equity by recognizing impervious area differentials across the single-family residential parcels. Stantec performed a detailed revenue sufficiency analysis (RSA) to evaluate the sufficiency of current stormwater rate revenues over a multi-year projection period, and provided the basis for a plan of annual stormwater rate revenue adjustments necessary to satisfy all financial requirements identified during the projection period from Fiscal Year 2020 through FY 2029, 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 was anticipating $2 million in borrowing in Fiscal Year 2020 with additional debt needed in future years to support the capital needs. As such, the RSA identified the need for an increase in stormwater revenues of 9.09% 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 stormwater fee and credit/incentive programs calculated. Two separate fee structures were recommended for SFRP and Non-SFRP based upon the distribution of impervious area. 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 allow the City to recognize differentials in SFRP impervious area that are of statistical importance and provide administratively efficient price signals across more than 75,000 individual parcels. A four-tier configuration was created that conforms to the underlying distribution of impervious area, while accomplishing the enhancement of equity in this customer class over the current fee structure. Configuring the tier breakpoints based on statistical distribution ensures that the tier break points at the underlying property data are not arbitrary and capricious. A parcel-specific fee structure is recommended for Non-SFRP, based on the actual measured impervious area per parcel expressed in terms of SFU. A review of the City's existing credit program was performed to identify opportunities to encourage installation of green infrastructure. To determine the appropriate monetary value of the stormwater fee credit or incentive, it was necessary to estimate the reduced costs incurred by the City as a result of the property owner's on-site management activities. Stantec performed a cost of service analysis to determine those costs that are incurred regardless of the use of and contributions to the stormwater system (often termed base costs) and those that are related directly to stormwater contributions (often termed quality and quantity costs). The values of the incentives were developed based on the potential reduction in costs associated with reduced stormwater contributions from parcels implementing the control activities and are outlined in Figure 2. Once the tiered rate structure was developed based upon the new impervious area data and the revenue requirements, extensive public outreach was performed by the City 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 would become effective. Stantec and the City designed a Web Portal for citizens to easily review their impervious area, see frequently asked questions and submit an appeal, comment or question. See Figures 3 and 4 for examples of the Web Portal functionality. The ArcGIS based Portal was linked directly to the parcel for City research and response. We learned the stormwater fee structure needs to not only be easy for the community to administer, but more importantly, easy for the community to understand.