Financing Storm Water

May 29, 2018
Storm water utilities can generate substantial revenues for local storm water management programs at relatively nominal charges

About the author: Keese is a manager of client financial services for PBS&J’s environmental services group. She has more than 20 years of expertise in public finance and management in both the public and private sectors.

Historically, funding storm water management programs has been problematic for most local governments. Today, hundreds of local governments have discovered a viable option—the storm water utility.

A storm water utility operates much like other utilities—water, sewer or power, for example—that are funded by service fees and administered separately from the general fund. As a result, the utility provides a dedicated and stable source of funds that are raised through charges based on a user’s contribution to local storm water runoff problems. While few people enjoy paying regulatory fees, this is an approach often seen as more equitable to rate payers. Experience with storm water utilities has shown that they are capable of generating substantial revenues for local storm water management programs at relatively nominal charges.

A storm water utility rate structure is developed around two major themes. First is the “user pay” concept: the parties that have the most storm water runoff and receive the most benefits from the management program pay their proportionate share. The second is that the utility is structured so that it can be administered fairly and cost-effectively.

The unit of measurement for service is most often based on impervious surface area and the establishment of a base-billing unit, commonly referred to as an equivalent runoff, or residential unit, or an equivalent storm water unit that satisfies the revenue requirements of the storm water utility. However, there are many elements to consider and policy decisions to be made before a base-billing unit can be calculated, including the utility’s watershed and land use characteristics, how developments without existing storm water facilities can be provided with credit incentives to implement best management practices, crediting in general and phasing rates to eventually include capital improvement construction, just to name a few.

Other topics for discussion when establishing rate structures include using fixed rates for overhead costs, assessing additional surcharges to areas with more complex storm water requirements and the need to meet federal requirements. Paramount to the establishment of storm water utility rates is obtaining buy-in from the community. It is recommended that public education be started at least a year before any fee program or change is put into place. If people understand what is being done and think it is fair, they will support and become part of the outreach process and pass the word along.

There is not one type of storm water utility rate-setting strategy that fits the needs of all communities. Being equitable across the board, having a solid basis for measuring service and establishing a solid administration structure are the keys to success.

About the Author

Karen Keese