A Stormwater Enterprise

March 24, 2006

Many cities have turned to utilities or enterprises to provide funding for stormwater management. In 2007, Colorado Springs, CO, is set to join the ranks of cities with stormwater enterprises in place.

With a population of 366,000, Colorado Springs is the second largest city in the state. However, until now, it has been the largest municipality in Colorado without a stormwater enterprise. Several cities, such as Denver, Fort Collins, and Boulder, have collected fees through stormwater utilities since the 1980s. One city, Aurora, has had a stormwater fee system since 1969. Other cities close to Colorado Springs that have set up stormwater utilities include Fountain, Pueblo, and Woodland Park.

Rapid growth is occurring within Colorado Springs’ limits and in the surrounding El Paso County. An article in the November/December 2005 issue of Stormwater, “Pay to Play,” delineated the efforts of the county to handle stormwater issues.

Precipitation in Colorado Springs is not normally a gentle, easy rain falling over a number of days. Rainfall usually comes in torrential downpours from thunderstorms. In June 1993, 3 inches of rain in a few hours brought a 6-foot flood at the intersection of I-25 and Bijou Street due to a clogged drain. A three-day rain in April 1999 caused millions of dollars of damage to bridges, roads, sewer lines, homes, and trails. The area is presently in a drought situation, but a storm on June 21, 2005, caused flash flooding that tore concrete chunks from stream channel armor.

Stormwater History
Ken Sampley, stormwater engineering manager for Colorado Springs, notes that the city has been trying to get a dedicated stormwater funding source for 20 years. From 1985 to 1992, a half-cent sales tax provided funding for stormwater management, transportation costs, and public buildings. Funding for capital improvements and other capital needs averaged $3.5 million in these years. In 1992, the tax was stopped by a vote of taxpayers. The average annual funding dropped to less than $1 million until 1997, when it dropped drastically to $250,000 annually.

Springs Community Improvement Program (SCIP) funding was approved by voters in elections in November 1998 and April 1999. The program funneled $19 million to stormwater projects. Days after the vote in 1999, the city was hit with a heavy rain event that damaged many stormwater structures and increased the backlog of projects. The money was spent quickly.

In 2003, no money was available. The Street Division performed some emergency repairs, drawing money from other projects. No routine maintenance was funded. In 2004 and 2005, money was allocated from the general fund for emergency stormwater repairs, but there were still no dollars for maintenance, and no dent was made in the critical backlog of projects.

The city has 400 miles of drainageways and open channels, 500 miles of storm sewer pipes, and 24,000 street inlets and catch basins. Without maintenance, many of these structures are in need of work. The current backlog is estimated at $295 million, with $66.5 million of that listed as immediate or high priority. Projects listed as immediate priority include several drainage projects, streambank stabilizations, construction of detention ponds, and replacement of bridges. Future storm events may change the list of priority projects, moving some from medium priority to critical.

Setting Up the Enterprise
City staff estimated that about $20 million were needed annually for stormwater projects, from capital improvements to maintenance and planning. Consideration was given to asking for a sales tax increase rather than setting up an enterprise. To come up with that amount, taxes would have to be increased about four-tenths of a cent. However, because tax revenues fluctuate due to economic conditions, a fee through an enterprise setup is a more stable funding source.

By city charter, an enterprise is a “City-owned business receiving over seventy-five (75%) of annual non-debt revenue from non-government sources.” Colorado Springs operates other city enterprises, including Colorado Springs Utilities, Memorial Hospital, and the Pikes Peak Highway. According to the state constitution, an enterprise can be set up without the need for an election. As a fee for service, the funds collected can be spent only for stormwater management. The properties that generate stormwater will pay for the service.

A citizens’ group meeting in 2004 had recommended a stormwater enterprise as the best solution. A citizens’ task force began meeting in June 2005 to come up with recommendations for the city council about the structure of the enterprise. The members of the task force were volunteers, and the composition changed slightly from meeting to meeting. Members included representatives from the Chamber of Commerce; developers; owners of businesses, both large and small; homeowners; and representatives from nonprofit agencies and the Trails and Open Space Coalition. The task force was commissioned to recommend:

  • The best structure of the enterprise
  • How the existing drainage basin fee program would fit into the enterprise
  • Regional organizational alternatives
  • Rate structures and billing options

AMEC Earth and Environmental worked with the task force. The company has consulted with several Colorado cities as they set up stormwater enterprises.

In September 2005, a workshop presented the preliminary recommendations to the city council. One consideration was the relationship between the activities of the city and Colorado Springs Utilities. The task force concluded that although stormwater does affect utility delivery systems, the focus of Utilities is on protecting this infrastructure and therefore there is no conflict between the entities. For example, in the case of stabilization of streambanks, the city has the lead role and works with Utilities as it protects utility locations.

Colorado Springs lies in the Fountain Creek watershed, which drains down to Pueblo, CO, and the Arkansas River. In the past, accidental and sometimes storm-related sewage spills have resulted in tension between the two cities and fines for Colorado Springs. Improvements in the system and cooperation between the cities will alleviate these problems. Some of the projects designated as immediate or high priority are to meet this concern.

Another consideration in the work of the task force was the condition of the existing drainage basin fee program. The program, begun in 1963, provided for fees to be determined for build-out of each sub-basin. Developers were required to pay fees at the time of recording a plat. Credits could be obtained by building stormwater structures. Problems occurred because some sub-basin accounts have not had enough money to reimburse developers for credits. The current system has a $20 million deficit in reimbursements owed versus fees collected. Under this program, the city is responsible for conducting drainage basin studies, but a lack of funds has prevented this. The task force was asked to determine a method to get the program back on track. Outdated studies have produced inaccurate fees to be collected, and developers have had to wait years for reimbursement of credits.

After eight meetings, the citizens’ task force presented 10 policy recommendations to the city council. Included were provisions for starting a stormwater enterprise that would be operated by the City of Colorado Springs with citizen input and with cooperation from other entities. The stormwater enterprise would have authority to fund and make recommendations for drainage basin studies and collection of developer fees and reimbursements.

According to the recommendations, the target fee for single-family residential units was at least $7.50 a month, and credits would be available for commercial properties. Public buildings would be assessed the fee, and payment would have to be added into their operating budgets. The fees for multifamily units would be billed to the property owners, who could decide whether to pass the cost on to individual tenants. Because streets transport runoff into the storm sewer system, their impervious area will not be assessed a fee.

Setting Fees
City staff had determined that about $20 million were needed annually to take care of the critical priorities in a five-year time frame. After a sample section of the city was examined, the fee required to meet this goal turned out to be slightly higher than the proposed $7.50-per-month fee. Jon Sorensen of AMEC gave a presentation showing that residential stormwater fees in Colorado range from $1.50 to $14.26, depending on infrastructure needs.

Mary Scott, senior specialist for Public Communications, suggested that to gain public acceptance, the fee needed to be in the $7.50 monthly range. In considering fees, a goal for commercial rates was to have the credits not exceed 5% of the expected revenue.

The recommendations called for the fee to be based on impervious area, with the calculation rounded down to the nearest 100 square feet. Basing the fee on impervious area is the most equitable method because impervious area is directly related to the amount of stormwater runoff.

Revenue estimates showed that 54% of the fees will come from residential units and 46% from non-residential. City staff evaluated the numbers at 120,413 residential and 8,406 non-residential lots.

Figuring out billing options was a challenge. Three options considered were adding the fee to the present utility billing, billing through the enterprise, and billing by El Paso County.

The advantage of billing through the existing Colorado Springs Utilities is that it would be a monthly billing and provide ease of payment for customers. Disadvantages included that it blurs distinction between services from Utilities and from the enterprise, and it raises concerns about how customer service and database management would be handled. Another problem is that some lots have multiple utility meters while others have none. Also, basing fees on impervious area is not a methodology used by Utilities; charges are based only on metered use.

To have the billing handled by the county would also bring the disadvantage of creating confusion over which entity is actually providing the service. In addition, county billing is on an annual basis and based only on taxable properties.

The solution chosen was to bill through the enterprise using the city’s billing system, PeopleSoft software. Stormwater billing will use the same system and staff as other city billing. Bills will be sent out quarterly in a staggered manner. Therefore a property owner will receive the first-quarter bill in January, February, or March and will have a 30-day payment window. Subsequent bills will arrive quarterly.

The city council accepted the task force recommendations, and on November 22, 2005, an ordinance was passed to create a stormwater enterprise. Fees will be collected based on the amount impervious surface of each lot, residential or commercial. The recommended fee is $0.00264 per square foot monthly, which comes to about $7.52 a month for the average residential customer. The city council will vote in the fall on the initial rate structure and then annually after that. All developed properties, including city and county facilities, nonprofit organizations, and commercial lots, will be assessed the fee. The Center for Nonprofit Excellence has recommended a 25% credit for nonprofits, and a decision on that recommendation will be made by the council. A customer assistance program is being considered to alleviate the costs for property owners who would face hardship paying the fee.

The ordinance set up a stormwater advisory committee to provide citizen feedback and advice on fee structure. The stormwater advisory committee will meet at least twice a year and is made up of 11 members:

  • One from each council district (four in total)
  • Two nominated by the Housing and Building Association of Colorado Springs
  • One member who owns a large commercial property
  • One member who owns a small commercial property or small business or multifamily residence
  • Two at-large members who own single-family residences within the city limits
  • One who represents a public institution, school, military base or post, or government entity with property inside city limits (These include two colleges, several school districts, Peterson Air Force Base, and Fort Carson.)

Thirty-three candidates applied for positions on the advisory committee, and the positions have been filled.

The task force recommendations include credits for commercial property. Detention ponds and other stormwater best management practices could result in up to 25% credit of the fees. For example, a property with a National Pollutant Discharge Elimination System (NPDES) stormwater permit would receive 10% credit; a property with systems to improve water quality would receive a 5% to 15% credit, depending on efficiency of systems; and a property owner who constructs and maintains public stormwater drainage infrastructure can apply for 25% credit.

The task force also recommended that the stormwater advisory committee consider a credit system for residential properties.

The original plan was for the city council to set the rates in April 2006 and for bills to be sent out in the final quarter of the year. However, business owners protested that they already had budgets set for the year and it would be difficult to pay the fee. It was decided to wait until January 2007 to send the first bills.

How the Money Will Be Spent
The projected annual revenue of $20 million will be divided into several parts:

  • Capital improvement projects $10.5 million
  • Maintenance and repairs $4.5 million
  • Water-quality permit $1.7 million
  • Engineering, planning, inspections $2.0 million
  • Drainage basin planning studies $1.0 million
  • Business, billing, and customer service $1.3 million
  • Loan repayment  $0.4 million

Administrative costs are projected to be about 7% of the budget.

Public Education
One of the challenges of setting up a stormwater enterprise is gaining public acceptance. For many people, hearing about the possibility of another fee that they have to pay leads to an immediate no. To educate the public, the City of Colorado Springs conducted two public meetings in January 2006. A presentation was given showing vivid pictures of stormwater damage and listing advantages of an enterprise solely for funding stormwater projects. It was emphasized that all areas of the city need stormwater projects, increasing the sense of stormwater funding as a citywide problem rather than something only newly developed properties should pay for. Graphs showed the rising backlog against the decreasing or even funding. The presentation included an explanation of federally mandated NPDES requirements.

Different rates of stormwater runoff from different land uses were illustrated, showing a rate of 1.6 cubic feet per second for undeveloped land and 6.7 cubic feet per second for a parking lot. The presentation included some background on other stormwater enterprises in Colorado. A pie chart demonstrated that $2.3 million out of $228.9 million of city revenue was allocated to drainage, and it was emphasized that this number is not stable because it depends on funding available. Tax revenues can vary widely due to economic conditions, as has been seen in the last five years.

A chart showed the estimated amount of fees for properties, such as the following:

  • Gas stations (5 times the residential rate)
  • Fast food restaurants (6 times the residential rate)
  • Retail stores (10 times the residential rate)
  • Churches (15 times the residential rate)
  • Large box stores (150 times the residential rate)

Meetings with business owners and nonprofits were also scheduled, as well as with the school districts of the area.

Eighteen pages of FAQs are available on the stormwater enterprise Web site, covering such questions as these:

  • What is stormwater?
  • What is impervious area?
  • How will I be billed?
  • Where will the money go?
  • Why don’t the developers pay for this?

The Web site points out benefits of the enterprise, such as a better-maintained storm sewer system, better flood control, and avoidance of fines of $27,500 per day and up that could be levied because of noncompliance with federal stormwater permit regulations.

In July, a four-page mailer was sent to property owners. There has been quite a lot of media attention, both print and television, about the stormwater enterprise. However, Mary Scott adds, “For the people who haven’t paid attention, the mailer will be the first contact.” Public meetings were held after the mailers were sent.

AMEC is handling customer service training. The customer service manager is a permanent hire, but the other employees will be temporary workers until the need can be assessed. Payment for the mailer, training, and employees came from a loan from the city’s general fund.

Impervious area is being determined from aerial photographs. Digitizing the 140,000 properties is also contracted to AMEC. When the first bills are sent out, a photograph of the property showing impervious area will be included. “This is leading edge compared to other communities,” says Ken Sampley, noting that most bills list only the fee, but the ones from the Colorado Springs enterprise will include an actual picture.

Property owners can appeal for reevaluation. The director of public works is tasked to affirm or modify the fee or request recalculation from the stormwater enterprise manager. Owners who are unsatisfied with the results of an appeal to the city have the option of appealing to the district court.

As 2007 approaches, the City of Colorado Springs prepares to join the ranks of cities operating a stormwater enterprise. The first bills will go out in January, and once the revenue stream has started, the enterprise is set to begin work on $67 million in critical projects.

About the Author

Roberta Baxter

Author Roberta Baxter specializes in science and technology topics.