WHAT: 2010 Stormwater Utility Survey
WHO: Black & Veatch, Overland Park, Kan.
RESPONDENTS: 70 utilities in 20 states
POPULATION SERVED: 5,800 to 4 million
SERVICE AREA: 6 to 2,000 square miles
EQUIVALENT RESIDENTIAL UNIT/ IMPERVIOUS AREA: 305 to 3,600 sq. ft.; mean = 7,253 sq. ft.
EQUIVALENT RESIDENTIAL UNIT/GROSS PROPERTY AREA: 2,090 to 14,500 sq. ft.; mean = 2,453 sq. ft.

With even dedicated storm-water utilities having trouble making ends meet, managers face a dual challenge: equitably recouping stormwater and/or combined sewer overflow (CSO) costs while trying — as always — to meet regulatory requirements. Even in established utilities, the former is at least as challenging as the latter.

That's the upshot of the latest “Storm-water Utility Survey” from global consulting, engineering, construction, and operation company Black & Veatch, which has conducted the survey every other year since 1991. Available for free at www.bv.com/stormwatersurvey, it addresses eight operational areas: organization/administration, planning, operations, finance/accounting, user fees and billing, quality issues/best management practices, public information/education, and major challenges/events.

Most of the most recent survey's 70 respondents recover most operational and capital costs from user fees. Most represent city rather than county or regional utilities and provide services directly rather than relying on other government departments or contractors to do so. Most measure success based on how well they meet regulatory requirements, control flooding, maintain water quality, and address complaints.

While the courts have taken various stances in characterizing “user fee,” a key principle they support is a reasonable nexus between fees and stormwater-related costs. Only 22% of respondents faced a legal challenge to their fee structure, and in more than half of those cases fees were sustained or a settlement was reached.

Trend No. 1: The funding gap is widening despite hefty rate increases. Inadequate resources remain the most critical hurdle for stormwater managers. In 2002, 53% of respondents said available funding met most of their operation's needs. Seven years later, however, only 36% are adequately funded and 10% don't have enough to meet even the “most urgent” needs.

This trend is most evident among the 19 utilities that have participated in every survey over the last 20 years, 10 of which have raised rates by more than 50% since 2001. Even with that magnitude of increase, six utilities — the cities of Palo Alto, Calif.; Tulsa, Okla.; Wichita, Kan.; Charlotte, N.C.; High Point, N.C.; and Cedar Rapids, Iowa — have funding to meet only the “most urgent” needs. Four that could “meet most needs” in 2001 have experienced further financial declines despite increasing their rates.

For the first time, the survey tried to gauge the impact of combined sewer overflows (CSO) on stormwater management costs. Of the 21% of respondents involved in such efforts, only 7% recover any mitigation costs through stormwater user fees.

Trend No. 2: Managers are deploying more technology to ensure fair and accurate billing. Half of respondents use impervious area to structure fees, 7% use gross area with an intensity of development factor (IDF), and one-third use a combination of both.

They're increasingly leveraging technology to determine land use delineations as well as gross and impervious area square footage. For instance, in 2005, 42% indicated using GIS and aerial/ortho imagery to determine impervious area compared to more than 65% today.

“Pressed to enhance the perception of stormwater charges as a user fee rather than a tax, and to be cost-effective, utilities are integrating the fee into existing water/sewer utility bills,” says Prabha Kumar, a Philadelphia-based director in Black & Veatch's management consulting business. “In addition, managers are leveraging GIS and aerial imaging technologies to ensure accurate determination of impervious area and land use.”

Trend No. 3: Resources, or the lack thereof, impact program administration. For the most part, once customer class, gross and impervious area, stormwater exempt status, and the like are established for a parcel, many utilities don't make a concerted effort to keep the information up to date. More than 40% of respondents don't have a defined process for regularly maintaining and updating parcel information.

Parcels are dynamic; they can be consolidated or subdivided and land use can change. Despite this reality, only 15% of the utilities update parcel information monthly. One-quarter update annually.

“While utilities are keen on establishing user fees to establish a dedicated revenue stream, they seem to lack the resources needed to support the level of effort required for program administration, managing parcel data, and billing operations,” says Kumar. “Investing in adequate resources ultimately pays dividends in the form of accurate billing, revenue maximization, efficient credit and appeals administration, and in establishing a sustainable stormwater program.”

Trend No. 4: Credits and incentives aren't very prevalent. Despite the emphasis on “green” solutions, more than 75% of responding utilities don't offer customers quantity-reduction credits or incentives.

In 2002, almost 60% of the survey's respondents gave credit for best management practices like private detention and retention facilities. In 2005 and 2007 the percentage fell below 50%; now it's up to 53%. Two-thirds say their ordinance for new or redevelopment doesn't give credit for best management practices.

Credits enhance the equity of cost-recovery efforts by rewarding customers for managing stormwater on their property. But they also lower a utility's revenues, and offsetting the gap requires raising rates for all other customers. With budgets already tight, encouraging conservation while also keeping rates down becomes a tough balancing act.

Kumar believes that “with innovative approaches that effectively address program priorities and costs and optimally balance diverse rate-relief factors including credits, incentives, phasing in increases, and capping charges, managers can establish a user fee program that garners the support of diverse stakeholder groups.”

Trend No. 5: Best management practices are on the rise. Managers are responding to increasing National Pollutant Discharge Elimination System (NPDES) requirements and wet-weather management by educating the public, detecting illicit discharges, monitoring quality, and street sweeping. In 2005, 64% reported monitoring stormwater quality and 71% had illicit discharge detection programs. Five years later, the percentages have risen to 81% and 94%, respectively.

In general, operations financed primarily by user fees are in better shape to deal with an increasingly difficult regulatory environment because they don't have to compete with other public services for a share of dwindling general revenues. But even so, financial adequacy and rate setting continue to challenge stormwater managers.

Editor's note: Reach Black & Veatch's Prabha Kumar at kumarpn@bv.com.

WEB EXTRA

Visit www.bv.com/stormwatersurvey for a list of stormwater user fees charged by 70 cities and counties.