Getting the Most Out of Your Stormwater Utility

April 13, 2022 / Blogs

New report highlights four ways stormwater utilities can help build more resilient communities and a stronger region:

Before the Water Rises: Building resilient communities with stormwater utilities

Across the country, nearly 2,000 communities have turned to stormwater utilities as a tool to help with water quality compliance, flood mitigation, and to manage and maintain stormwater infrastructure. As explained in our introductory blog, a stormwater utility is a way to organize and fund stormwater management activities. Typically, stormwater management is funded by a municipality’s General Fund and, for large capital projects, supplemented by municipal bonds and low-interest loans. Yet, stormwater utilities have been widely adopted to create a dedicated revenue stream for stormwater-related services, often in response to severe floods or as a means to finance implementation of a stormwater management plan.

Stormwater utilities can effectively streamline stormwater management activities and provide a dedicated source of revenue to fund them – a potentially vital tool in the face of a rapidly changing climate and the extreme weather it brings. Sounds great, right? In a new report, MPC outlines four key considerations to make sure a stormwater utility can meet the needs of your community.

Four Takeaways

Based on research and conversations with experts in the field, we identified four important considerations for establishing or improving a stormwater utility:

1. Choose a fee structure that incentivizes a partnership between property owners and the utility

There are a variety of ways to assess stormwater fees. Using a simple, flat fee means everyone (or the same property type – residential, commercial, etc.) is charged the same amount. This is the easiest way to assess a stormwater fee, but it is also criticized as being regressive, disproportionately impacting low-income households and parcels with comparatively less stormwater runoff. Plus, it does not incentivize the removal of surfaces that negatively impact flooding, such as concrete patios and other impervious surfaces. A fee structure that factors imperviousness into the assessed fee means property owners are paying an amount commensurate with their impact on stormwater runoff.

Fees based on imperviousness are frequently paired with a credit system to incentivize the removal of hardscape in favor of green stormwater infrastructure, such as nature-based solutions and surfaces that mimic the favorable stormwater management attributes of a predevelopment landscape. Ultimately, the fee structure a utility chooses should reflect their goals, needs, and community priorities and should be reassessed periodically to ensure revenues are sufficient to meet those needs.

Fee structure recommendations:

Adopt a fee structure that encourages the removal of impervious surfaces and incentivizes green stormwater infrastructure.

Build regular rate reassessments into the program design to ensure the utility is generating sufficient revenues.

2. Consider affordability when developing a fee structure

How will your community members respond when asked to pay a new fee? Based on our conversations, there will likely be some pushback. It is essential when considering a stormwater utility to engage stakeholders early and develop a utility that is based on clearly stated, clearly understood, and jointly arrived at priorities. For example, capital projects with the potential to mitigate all but the very worst storms are expensive and will require a high stormwater utility fee. Some communities can afford that and are willing to pay. Others might arrive at a compromise where a moderate level of protection is achieved and a more reasonable fee assessed.

In either case, any new fee is likely to cause a burden to some percentage of the community. Where appropriate legal authority exists, affordability measures should be adopted, such as offering fee reductions for seniors and income-qualified households. Others who may be overly burdened – such as small, locally-owned businesses – should be engaged directly to understand the need for the fee and the potential to lower assessments, such as through the removal of hardscape.

Affordability recommendations:

Prioritize community engagement so that constituents are involved early in the decision-making process, and jointly balance priorities between an acceptable level of risk and an affordable fee.

Build cost reductions or other affordability considerations into fee design, where allowed, and budget according to what community members can reasonably afford.

Work with local business owners directly as they are likely to be among the most affected by an additional fee.

3. Identify solutions to overcome municipal capacity constraints

Having a dedicated source of revenue can improve a community’s ability to do more to manage stormwater. More funds can result in the ability to bring on staff dedicated to stormwater responsibilities while freeing up public works staff to take on other priorities. Of course, many of the communities that stand to benefit most from establishing a stormwater utility lack the staff and other resources necessary to establish one.

To overcome this, communities can create a fee to fund a single, priority project which already has preliminary engineering completed, perhaps from a prior grant application. Another option is to establish a fee based on regional or national averages, such as five dollars per month. These solutions result in an easier process for the initial establishment of a fee and provide a platform for the community to build on in the future.

Municipal capacity recommendations:

Start small by using fee revenue to fund one capital project or look at average fee assessments. This provides an easily achievable starting point from which the utility can grow.

4. Look beyond jurisdictional boundaries to address shared stormwater challenges

Rainfall does not heed municipal borders, and the scope of stormwater issues often goes beyond what a single municipality can handle. Regional utilities such as the Northeast Ohio Regional Sewer District can manage and fund projects of a broader scope as well as facilitate inter-municipal partnerships to maximize their individual capacities.

Establishment of a new fee even for existing regional stormwater management agencies is, admittedly, not a small undertaking. But smaller scale regional cooperation can also have a big impact. Participation in coalitions and informal municipal partnerships allows neighboring municipalities to share resources and lessons learned. These can include the development of educational material templates, ordinance language, and other resources to be used by all partner municipalities.

Regional recommendations:

Engage county or regional governments in conversation around the establishment of a regional utility fee to address regional stormwater challenges.

Partner with neighboring municipalities to share lessons learned and develop shared resources.

Making a good thing even better

By establishing a dedicated revenue source for stormwater management, stormwater utilities allow municipalities to address infrastructure operations and maintenance needs and adapt to increasingly extreme weather. The fee structure can be used to incentivize partnerships with property owners that result in decreased demand on the sewer system. And, in some places, fees can be designed in consideration of the impact to vulnerable residents and other stakeholders. Regardless, dedicated funding improves stormwater management capacity for communities with and without other resources at their disposal, and looking to regional partners can result in improved local stormwater management.

With these four considerations in mind, stormwater utilities can help build more resilient communities and a stronger region.

Read the full report, “Before the Water Rises: Building resilient communities with stormwater utilities”

We are deeply grateful to the Gaylord and Dorothy Donnelley Foundation for supporting this work, as well as all those who make MPC’s robust water agenda possible, including the Charles Stewart Mott Foundation, Crown Family Philanthropies, Grand Victoria Foundation, the Joyce Foundation, McDougal Family Foundation, and the Prince Charitable Trusts.

This blog’s co-author, Olivia Blasi, is a Research Assistant with MPC’s Water Resources program. They are a graduate of Seattle University where they were part of the women’s rowing team and involved in the university’s Center for Environmental Justice and Sustainability.