appendix b - philadelphia water department cac report... · stormwater utility and rate...

CAC Report Appendix B

APPENDIX B

CAC Meeting Summary Notes

CAC Report Appendix B

CAC MEETING # DATE

1 Thursday, April 28, 2011

2 Thursday, May 19, 2011

3 Thursday, June 09, 2011

4 Thursday, June 30, 2011

5 Thursday, July 21, 2011

6 Thursday, August 11, 2011

7 Thursday, September 01, 2011

8 Thursday, September 22, 2011

9 Thursday, October 13, 2011

10 Monday, November 14, 2011

CAC Meeting #1 Summary April 28, 2011

Stormwater Utility and Rate Consultation – Credits Analysis and Recommendations Study April 28, 2011 PWD CAC Mtg 1 Summary 17MAY11 V3.doc 1

Customer Advisory Committee Meeting # 1 Meeting Summary April 28, 2011 6:00‐8:30pm; ARAMARK Tower, 1101 Market St., 15th Floor The first meeting of the Philadelphia Water Department’s Stormwater Customer Advisory Committee (CAC) commenced at 6:30pm with a brief opening statement by Howard Neukrug, Philadelphia Water Commissioner, Howard expressed his appreciation for the group’s participation and his hope that the process would be as helpful to the members of the CAC, as it will be to PWD.

Housekeeping Several housekeeping items were addressed before the beginning of the meeting and it was noted that alternates should be appointed to attend meetings on behalf of CAC members when they are unable to attend. Additionally, media participation and attendance was discussed. The CAC agreed that their names and affiliations would be released and the CAC agreed to speak to the media as a group but, in the interests of helping the CAC’s success, would not initiate individual media contacts. The proposed meeting schedule was reviewed. Meetings will be held every three weeks from 6:00pm to 8:30pm with a meal provided at 6:00pm and the meeting commencing at 6:30pm. Meetings will not run longer than two hours without the CAC’s permission. The June 30th meeting date will be revisited as it may interfere with the July 4th holiday.

Overview and Charge A brief history of PWD’s stormwater fee from the 1880s through today was presented, walking the committee through how the charges were originally captured on bills, through the changes to equivalent meters then to parcel‐based charges. It was noted that the original shift to a parcel‐based stormwater charges was based partially on the recommendations of the original CAC. The current situation was then presented. The CAC has been formed at this time to discuss:

Rate Relief Special Ratepayer Cases Credits Incentives

It was stated that PWD wants to hear the diverse opinions of the CAC members and wants the CAC to have a voice in the upcoming rate process. The CAC was presented with the following charge (noted in Handout#1):

“To provide advisory opinions to PWD on topics related to rate structure, stormwater credits and incentives, and special ratepayer situations to be considered as a part of the PWD’s 2012 rates case.”

Stormwater User Fees A brief of overview of stormwater utilities was presented, beginning with a quick lesson on how nature manages stormwater via natural processes and what the consequences of impervious surfaces are on the runoff volume,



peak flows and pollution within a given watershed. These impacts equate to the following in terms of costs to a community:

Peak Flow = flood control issues, conveyance sizing Volume of Flow = maintenance, volume treatment costs Quality of Flow = compliance, stormwater treatment

The parameters most commonly used in the development of stormwater fees, Gross Area and Impervious Area, were discussed. These parameters characterize a property’s contribution to stormwater peak flows, runoff volume and water quality. It was noted that Philadelphia is currently in transition from an unusual method of charging for stormwater (estimated meter base) to a more typical method. The CAC was presented with the basic tests that a stormwater fee should meet. They are as follows:

Be fair and reasonable Be based loosely on demand Not be illegally discriminatory Have total costs substantially related to provision of facilities and services Include a reduction provision – i.e. credits

CAC Process and Activity CAC discussion topics were presented. The CAC will be able to have open discussions and “blue sky” ideas. In general, consensus may not be reachable but the ideas and ranges of opinions will be discussed. The legal aspects of recommendations and suggestions will be further investigated under separate efforts by PWD’s legal counsel. It was stated that the CAC is intended to be an advisory/idea group. The CAC won’t be responsible for making policy but will help inform the next rate case and provide a voice for the public in the process. The next rate case is slated to begin in January 2012, following the appointment of an Independent Hearing Officer selected jointly by the City Council President, City Controller and the Mayor. The “givens,” as presented in Handout #1, were discussed. Generally, these are boundary conditions, within which the CAC and PWD must operate. They include: PWD will continue to manage stormwater; the CAC cannot make costs go away (zero sum game – someone must pay); and we must stay within legal boundaries. The ground rules for the CAC’s meetings were then discussed and it was noted the CAC should reflect a “Culture of Honor” among all participants. The agreed upon ground rules are as follows:

1. Wait to be recognized 2. Stay on topic 3. One question at a time 4. Share time with others 5. Avoid sidebar discussions 6. Arrive on time and stay until the end 7. Send an alternate if you cannot attend a meeting. *

*It was recommended that the “core” committee member brief the alternate and that the alternate be there to take notes and be the eyes and ears of the “core” member so that they can stay informed of the progress made with each meeting.



Meeting Topics Discussion The basics of the rate development process and what steps are taken in rate development were presented. It was noted that the meeting topic schedule generally follows this process. The steps generally are:

1. What is stormwater? 2. What does it cost? 3. How should we divvy up these costs? (basic rate structure) 4. Where else can we get money? (other fees and income) 5. Are there loopholes to close? (special cases) 6. Who should get a break? (exemptions) 7. Who should be rewarded? (credits) 8. What do we want to stimulate? (incentives)

The topic titles then are:

1. Rates/Costs 2. Rate Relief/Allocation 3. Special Issues 4. Credits 5. Incentives

The CAC discussed the proposed CAC meeting roadmap and the following changes were made:

Based on the request of the CAC members, it was agreed that background information on the physical and financial structure of PWD would be provided. This information will be presented at the next CAC Meeting on May 19th.

At the third CAC meeting, ideas for Rate Relief will be presented, with the previous education meeting as the backdrop. The overall meeting schedule and topics will be adjusted in order to accommodate the education meeting. CAC Members David Wolf and John Bonner agreed to provide Joanne with feedback on what they would like to see covered in the background and education meeting.

Per the CAC’s request and recommendation, it was agreed to rearrange the meeting topics schedule to discuss incentives before credits. It was noted that the meeting schedule and proposed topics are tentative and can be revisited later if necessary.

Based on the outcomes and recommendations of the CAC meetings, a final report will be generated and the CAC will have the opportunity to review and provide comment. There may be a need for an additional meeting to discuss the final report.

Objective Criteria The previous CAC’s Objective Criteria, as shown in Handout #1, were presented. Additions, deletions and changes to the criteria were then discussed and the following additional criteria were recommended by the CAC:

11. Payback Guarantee – If I make a deal with you, I want to make sure that you stick to that deal. 12. Recognize past investments – grandfather in – don’t make people go back and build 9a. Fair and Equitable – Recognize inability to do anything to reduce fees.

The CAC put the criteria to a vote. The voting results were as follows:



Number Criteria Votes 5 Do not harm the City (residents or businesses) 17 12 Recognize past investments – grandfather in – don’t make people go back and build 12 4 Promote good stormwater management behavior 11 11 Payback Guarantee ‐ If I make a deal with you, I want to make sure that you stick to that deal 11 10 Promote good stewardship of financial and environmental resources 10 9 Be equitable and fair / 9a ‐ Recognize inability to do anything to reduce fees 9 1 Be clear and understandable 7 8 Be revenue neutral 6 6 Be efficient 5 2 Promote stormwater revenue stability 4 7 Be cost effective 4 3 Reflect what has been learned in other places 3

Attendees List CAC Committee Members and Alternates

First Name Last Name Affiliation

Robert W. Ballenger Esq. Community Legal Services Thomas Becker Philadelphia University Paul Bonasch Perfecseal Philadelphia Jack Bonner Resident Michael Carter Manko Gold Katcher & Fox (alternate for Joe Manko) Byron Collins PennFuture (alternate for Brian Glass) Vincent Dougherty City of Philadelphia - Commerce Arty Elgart Elgart & Son Arthur Friedman Archdiocese of Philadelphia Brian Glass PennFuture Donald S Haas Brandywine Realty Trust Nick Iervolino Chapman Auto Group (alternate for Michael Chapman) Maia Jachimowicz City of Philadelphia - Finance Shelby Linton-Keddie Esq. McNees, Wallace & Nurick Sheilah M. Louis Esq. City of Philadelphia - Legal Lisa Magee Philadelphia Regional Port Authority Richard McClure Kennedy Wilson Properties Kes Pliuskonis Cardone Industries Joe Pyle Scattergood Foundation David Wolf Wolf Investment Corporation John Zoltowski City of Philadelphia - Controller (alternate for Harvey Rice)

Other Attendees First Name Last Name Affiliation

Joseph Clare Philadelphia Water Department



Andre Dasent Philadelphia Water Department Joanne Dahme Philadelphia Water Department Prabha Kumar Black and Veatch Amanda Lieberman Simon Public Relations Henrietta Locklear AMEC Earth and Environmental Brian Merritt AMEC Earth and Environmental Howard Neukrug Philadelphia Water Department Pat Perhosky Philadelphia Water Department Andy Reese AMEC Earth and Environmental Casey Thomas Philadelphia Water Department Katy Travaline Drexel University (invited by Glen Abrams) Sydina Williams Simon Public Relations

CAC Meeting #2 Summary May 19, 2011

Stormwater Utility and Rate Consultation – Credits Analysis and Recommendations Study April 28, 2011 PWD CAC Mtg 2 Summary 19MAY11 V3.docx 1

Citizen Advisory Committee Meeting # 2 Meeting Summary May 19, 2011 6:00‐8:30pm; ARAMARK Tower 1101 Market St. 15th Floor The second meeting of the Philadelphia Water Department’s Stormwater Citizen Advisory Committee (CAC) commenced at 6:30pm with a brief review of the previous meeting’s topics and outcomes.

Review of Previous Meeting The current situation was revisited via the mountains and the sleepy valley example as presented in the accompanying PowerPoint Presentation for Meeting #2. It was noted that the overall goal is to achieve a sense of fairness and that the costs are allocated fairly and everyone feels the fee is fair. The way in which rates might be adjusted will be presented in a future meeting and this meeting’s topics serve as an education and primer to that discussion. The charge to the CAC was revisited and it was noted that the group is intended to be an advisory and not a policy making group; therefore, the group does not need to reach consensus. The broad range of opinions does not need to be reconciled but PWD wants to understand the range of opinions and concerns of the committee members. The givens were reiterated, namely: PWD will continue to manage stormwater; the CAC cannot make costs go away ‐ zero sum game – someone has to pay; and we must stay within legal boundaries. It was noted that the some CAC members may not necessarily agree with the givens as currently stated. It was noted that any questions or concerns that arise during the meeting, which aren’t able to be addressed, will be noted in the “Parking Lot”. The parking lot is intended to avoid sidebar discussions, which are either off topic or can’t be addressed during the meeting and stay within the agreed upon meeting.

What’s important to you? Based upon the initial CAC meeting, the following overarching ideas items were noted as being important considerations for any proposed changes or adjustments in the stormwater fee methodology:

We want the allocation to be consistent and fair to everyone We want the charges to make common sense We want to get individual credit if we do something to reduce our impacts.

The CAC members were then asked to express what was important to them as individuals and representatives of their respective industries and interests. The CAC members were reminded that they need to be a representative for themselves and people like them as well as a representative of Philadelphia. Essentially, CAC members are in at the “ground floor” of the next rate case and will be well equipped to intervene in the process if they so choose. The results of the discussion are summarized in the following table:

Name Affiliation What’s Important to You?

Robert W. Ballenger Esq. Community Legal Services Impacts on residential property owners

Thomas Becker Philadelphia University University has invested in stormwater management and seen reductions in their fees



Name Affiliation What’s Important to You? at some campuses, wants to see continued benefit from proactive

Paul Bonasch Perfecseal Philadelphia Direct dischargers/Costs to manufacturer/credits complements their mission of sustainability

Jack Bonner Non‐sewered area property owner

Interest in green initiatives/residential/ parcels with no water and sewer infrastructure

Michael Carter Manko Gold Katcher & Fox Concern from clients perspective – Direct Discharges along the Delaware River

Vincent Dougherty City of Philadelphia – Commerce

Understand situation from business perspective/work towards fairness

Wesley Firkin Thackray Crane / Unified Business Owners Association

Costs to business owners ‐ keeping employees employed, continue to serve and attract tenants

Arthur Friedman Archdiocese of Philadelphia Understanding of stormwater/differences between parcels/Education to address questions

Brian Glass PennFuture Incentives for private stormwater management

Donald S. Hass Brandywine Realty Trust Impact on business/fairness in allocation for all –both business and residential

Maia Jachimowicz City of Philadelphia – Finance Impacts to City Operation/Impacts to residents/ general oversight from City perspective

Shelby Linton‐Keddie Esq. McNees, Wallace & Nurick Balance between those hit hardest and those finally getting relief

Sheilah M. Louis Esq Philadelphia City Council – Legal

Voices are heard/fair and consistent application of fees – representing City Council as a whole/not specific wards

Bob Martin Brandywine Realty Trust Interest in equitable distribution of costs/education

Lisa Magee Philadelphia Regional Port Authority

Expansion of credits/Special Cases/ Direct Dischargers who cannot offset costs

Richard McClure Kennedy Wilson Properties Preserve previous CAC recommendations while recognizing impacts to others/Preserve direction of fairness to all

Kes Pliuskonis Cardone Industries Fee itself (amount)

Joe Pyle Scattergood Foundation Fee amount/ Charge impact on Creeks

David Wolf Wolf Investment Corporation/Unified Business Owners Association

Concern for businesses with high fees and residents of the City

Following the discussion it was noted that the greatest challenge for the CAC was the “Definition of Fairness” and that fairness in the case of the stormwater fee and associated programs was not as simple as an electric meter which can directly track a customer’s demand on systems and services. Rather in this case, fairness is subjective.



Revised Meeting Topics and Schedule Based upon the CAC’s request at the previous meeting, this meeting was intended to provide an educational overview of PWD’s physical system and stormwater rate allocation. The corrected meeting dates were noted and presented to the CAC. Additionally, the meeting topics were rearranged to discuss incentives before credits per the CAC’s request and recommendation. Revised Meeting Topics and schedule are as follows:

Date Topic

April 28 Introduction

May 19 Stormwater Program and Costs

June 9 Rate Relief Issues

June 30 Special Issues

July 21 Incentives 1 – Review of Current and Possible Incentives

August 11 Incentives 2 – Incentives and Credits Integration

September 1 Credits 1 – Intro and General Policies

September 22 Credits 2 – GA, IA and NPDES Credits

October 13 Credits 3 –Residential and Other Credits

November 3 Final Meeting

PWD Physical System Overview Before providing the CAC with an overview of PWD’s physical system, the CAC was provided with an update on several initiatives currently underway within PWD to begin addressing questions and concerns around the stormwater fee. Philadelphia Inquirer Article on Proposed Stormwater Assistance Program The CAC was alerted to a newspaper article that appeared in the Philadelphia Inquirer. The article entitled “City Property Owners, Water Department Reach Deal on Storm Water Fees,” by Harold Brubaker was published on May 13, 2011 and discusses the Proposed Storm Water Assistance Program which would cap fee hikes at 10 percent annually for two years on about 1,500 nonresidential properties that are slated to have a monthly increase of at least $100 each starting July 1. It was noted that the program is temporary and that in order to be eligible for the program, all customer accounts including water, wastewater and stormwater as well as City taxes must be current. In addition, City, State and Federal properties are not eligible for relief under the proposed program. The estimated impact of temporary assistance program is $20M over the next 2 years. In order to make up for the lost revenue, funds will be taken from Rates Stabilization fund to provide a cushion between now and the completion of the next rate case. PWD apologized for not being able to inform the CAC of the proposed policy prior to the publication of the article. PWD had meant to inform the CAC of this development prior to making the announcement to the public, noting that PWD wants to be caring and recognize customers various needs. This proposed change to the phase‐in period for property is meant to address the immediate impact and provide more short term relief rather than



make adjustments to the underlying fee and credit programs. PWD will make every effort to keep the CAC informed of any upcoming policy developments.

It was noted that the CAC will have input in the next rate case when it commences in January and that this process will help PWD define policies which will affect the utility for the next 10‐15 years. It was noted that the proposed temporary policy is open for public comment for the next 30 days and the CAC is encouraged to inquire with PWD should they have any questions or comments on the proposal.

D‐Permits It was also noted that many of the CAC members have had questions around the D‐Permit process. Currently, the City of Philadelphia Code does not allow PWD to charge parcels or properties which are disconnected meaning they are not physically connected to PWD’s sewer system. PWD is currently working with City Council to allow the Department to charge for all parcels as these parcels benefit from stormwater management programs and services and PWD is charged with maintaining the health and integrity of the waterways within the City by the State and Federal government. It was noted that the estimated financial impacts from D‐Permits is approximately $5M for this fiscal year. Members of the CAC had questions regarding City properties and what properties were exempted. It was noted that Fairmont Park was exempt as well as the streets, which are considered to be an extension of the stormwater conveyance system. The CAC requested an estimate of how much the park exemptions were accounted for in terms of GA and IA. This request was noted in the “Parking Lot.”

PWD Mission, Programs and Services Overview The overview began with a review of PWD’s Mission as presented in Handout #4 was presented to the CAC. It was noted that PWD serves Philadelphia and the region through the provision of integrated water, wastewater, and stormwater services. The utility's primary mission is to plan for, operate, and maintain both the infrastructure and the organization necessary to supply high quality drinking water, to provide a reliable water supply for all household, commercial, and community needs, and to sustain and enhance the region's watersheds and quality of life by managing wastewater and stormwater effectively. An overview of PWD’s Physical System was then provided noting the service areas, wholesale and retail, for water and wastewater (including both sanitary and stormwater), the number of treatment plants, distribution and conveyance lines, pump stations, etc. Members of the CAC had questions regarding the age of the water treatment plants owned and operated by PWD and it was noted that the plants date back to the 1950s but have been upgraded in order to meet current drinking water standards as determined by the State and Federal governments. Additionally, as the water treatment plants intakes are located on local streams and rivers, PWD must protect the entire watershed within its services area in order to ensure that the water drawn for drinking water is as clean as possible. Additionally, PWD works with communities in the headwaters of the streams and rivers. It was also noted that while PWD doesn’t own the stream systems present within the City, but they are mandated to clean them up, restore habitat and maintain water quality. Additionally, wholesale customers are located within separate sewer areas not maintained by PWD.



An overview of the various stormwater management programs PWD provides were discussed including Flood Relief Programs, Stream Protection and Restoration, Total Maximum Daily Load (TMDL) and the Combined Sewer Overflow Program. The CAC was reminded that stormwater is not pollution free. In the prior years, Combined Sewer Overflows had been the accepted design standard and the “dilution solution” was widely accepted. Since that time it has been determined that this methodology doesn’t necessarily work. The CSO area of the system is older system in the City. Thus, the City built separate systems following World War II. After WWII, philosophy changed. The systems constructed as separate systems since that time have benefited from – much of the debt service currently being paid down is covering the costs of investments made in this separate system. While on a dry weather day, a CSO system is better, a separate system, while costing more to construct, is preferred for wet‐weather events. However, stormwater does require controls and treatment in order to meet State and Federal regulations such as those described in the Wissahickon TMDL.

PWD’s Green City, Clean Waters program was then discussed. The Green City, Clean Waters plan serves as Philadelphia’s Long Term Control Plan, which is PWD is currently in the process of entering into a Consent Agreement with the State of Pennsylvania mandate to comply with State and Federal Rules in 25 years. The vision for the plan is to unite the City of Philadelphia with its water environment, creating a green legacy for future generations while incorporating a balance between ecology, economics, and equity. It is designed to provide many benefits, so that every dollar spent provides a maximum return in benefits to the public and the environment. While maintaining and upgrading one of the nation's oldest traditional infrastructure systems is an underlying principle, investments into greening the City also serves as a means to provide benefits to all the residents of the City of Philadelphia while meeting ecological restoration goals. A quick background on the types of “green” approaches that might be utilized throughout the City was provided. Several members of the CAC raised questions regarding the selection of the green approach and why a purely “grey” approach as adopted by other cities, such as Boston, was not selected. It was recommended that CAC members, who have questions on the proposed plan, should read the Green City Clean Water Long‐Term Control Plan (LTCP) if they had any questions on why the “green alternative” was selected. After CAC members review the document, they are encouraged to reach out to PWD and, if necessary, schedule a separate meeting to discuss their questions and concerns. It was noted that PWD is spending money within the public right of way to help address stormwater flows from streets and other areas throughout the City An overview of PWD’s Stormwater Permit Program, Defective Lateral Programs and waterways restoration efforts were also provided. The Waterways Restoration Program includes the Waterways Restoration Team (WRT), stream restoration and rehabilitation projects and construction projects which are designed to mitigate the impacts on local streams from increases in stormwater runoff to both the physical stream and associated eco‐system. Stormwater Cost Allocation An overview of PWD’s stormwater cost allocation methodology, which was used in the previous rate case study, was provided by representatives of PWD’s rate consultant, Black and Veatch. This overview is further detailed in Handout #5 as provided to the CAC. As a starting point, a summary of the funds were presented, detailing how costs are allocated between water and wastewater and detailing the differences between wholesale and retail service. It was noted that the stormwater and sanitary fees are part of the retail service portion of the overall Enterprise Fund and that the CAC is focused on the stormwater portion of these charges. The remainder of the presentation provided was intended to show the underlying allocation methodology and how costs are distributed between sanitary and stormwater costs currently.



Breakdowns of the O&M and Capital Costs were provided along with an overview of the terminology used to describe and define the current allocation methodology. The functional components of the wastewater costs for non‐customer and costumer costs were discussed, as well as the allocation factors, which drive how costs are divided between sanitary and stormwater. The functional allocation basis looks at the system from the perspective of what it was designed for and how the system is operated. The factors for conveyance (piping and pumping), treatment, inlet cleaning and customer costs (i.e. billing and administration) were described and presented to the CAC. It was noted that the Allocation Factors, which serve as the science behind the allocation decisions, will be reviewed again during the next rate case. The CAC Members were then asked if they had any questions on the rate allocation methodology. The CAC members asked how costs associated with waterways were captured in the current allocation. It was noted that most Capital Costs for waterways related programs were captured within the conveyance costs. Additionally, as these cost allocation can shift year to year based on the approved budget, the underlying rates would need to shift year to year – if the fees were based purely on the budget for that fiscal year. This is why a rate case looks forward at a multi‐year projection of anticipated costs rather charging based on a yearly fiscal budget. It was noted that the cost allocations presented are a backward looking view based on the previous rate case. However, there is a process in place that is a forward looking. This will be presented to the CAC when available. Additionally, more than 50% of investment of the proposed capital budget will be in separate area to address flood protection and flooding problem areas. The Watershed Restoration Team (WRT) costs are included in the costs associated with waterways. The CAC also inquired as to how environmental projects fit into the costs. It was noted that as more environmental projects (including green projects) are completed that they will be included in the rate base; the cost of capital associated with these projects will be paid off over the next 30 years. The CAC then asked if they would be presented with examples of how the current rates were arrived at and what the impact was to the customer base includes those that consider themselves “winners and losers.” It was agreed that during the next CAC meeting, the CAC will presented with a “Dow Jones” list of properties and a set of “dials” which can be adjusted to adjust the underlying fee. The intent is to provide the CAC with as much data as possible so that they can make decisions and have an informed opinion. Members of the CAC were interested in knowing how the stormwater fee changed from what was originally proposed by the initial CAC and today. Additionally, the CAC asked if the City was still putting in new pipes and how much of the costs were attributable to debt service. It was noted that the Capital Costs detailed in the allocation are actually the debt service costs as capital costs are projected out over a multi‐year period. As the meeting concluded, it was noted that anyone who wished to stay could remain and continue to ask questions.



Parking Lot The following questions were raised. As part of the CAC Meeting process, these questions will be answered and addressed either as part of the next CAC Meeting scheduled for June 9th if time permits or under separate cover.

Parking Lot What is the gross area of exempted parks? What is the balance of the Rate Stabilization Fund? Do cities of similar size have the same number of water treatment plants as Philadelphia?



Robert W. Ballenger Esq. Community Legal Services Thomas Becker Philadelphia University Paul Bonasch Perfecseal Philadelphia Jack Bonner Michael Carter Manko Gold Katcher & Fox (alternate for Joe Manko) Byron Collins PennFuture (with Brian Glass) Vincent Dougherty City of Philadelphia – Commerce Wesley Firkin Thackray Crane (alternate for Arty Elgart) Arthur Friedman Archdiocese of Philadelphia Brian Glass PennFuture Donald S Haas Brandywine Realty Trust Maia Jachimowicz City of Philadelphia – Finance Shelby Linton-Keddie Esq. McNees, Wallace & Nurick Sheilah M. Louis Esq. Philadelphia City Council – Legal Bob Martin Brandywine Realty Trust Lisa Magee Philadelphia Regional Port Authority Richard McClure Kennedy Wilson Properties Kes Pliuskonis Cardone Industries Joe Pyle Scattergood Foundation David Wolf Wolf Investment Corporation John Zoltowski City of Philadelphia - Controller (alternate for Harvey Rice)


Glen Abrams Philadelphia Water Department Marissa Bartlett CDM Andre Dasent Philadelphia Water Department



Other Attendees Joanne Dahme Philadelphia Water Department John Digiulio Philadelphia Water Department Dave Jagt Black and Veatch Gerald Leatherman Philadelphia Water Department Anna Lepchuck Philadelphia Water Department Amanda Lieberman Simon Public Relations Henrietta Locklear AMEC Earth and Environmental Brian Merritt AMEC Earth and Environmental Mark Miamone CDM Howard Neukrug Philadelphia Water Department Pat Perhosky Philadelphia Water Department Andy Reese AMEC Earth and Environmental Casey Thomas Philadelphia Water Department Katy Travaline Drexel University (invited by Glen Abrams) Erin Williams Philadelphia Water Department Sydina Williams Simon Public Relations John Wolf Wolf Investments

CAC Meeting #3 Summary June 9, 2011

Stormwater Utility and Rate Consultation – Credits Analysis and Recommendations Study June 9, 2011 PWD CAC Mtg 3 Summary 29JUN11 V2.docx 1

Citizen Advisory Committee Meeting # 3 Meeting Summary June 9, 2011 6:00‐8:30pm; ARAMARK Tower 1101 Market St. 15th Floor The third meeting of the Philadelphia Water Department’s Stormwater Citizen Advisory Committee (CAC) commenced at 6:30pm with a brief review of the previous meeting’s topics and outcomes.

Review of Charge to the CAC The meeting began with a review of the Charge to CAC: “To provide advisory opinions to PWD on topics related to rate structure, stormwater credits and incentives, and special ratepayer situations to be considered as a part of the PWD’s 2012 rates case.” The committee was reminded that “we don’t have to agree on ideas and desires, we only have to agree to have a mutually informative friendly discussion.”

Housekeeping The CAC was asked if the next meeting, which is currently scheduled for June 30th, would work for everyone given that the July 4th Holiday falls on the following Monday. The committee agreed to hold the meeting as schedule and those who are unable to attend will send an alternate. PWD provided an update on the proposed D‐Permits bill. D‐Permits (or Discontinuance Permits), as described in Handout #3, allow property owners to obtain a permit under existing City Code which allows them to permanently disconnect from water service and to stop being charged by PWD for water and sewer service. The proposed bill would revise the existing code to allow PWD to charge these properties for stormwater fees. The bill has moved out of committee. PWD will continue to inform the CAC of any upcoming policy developments. Green City, Clean Waters Update The CAC was provided with an update on Philadelphia’s Green City, Clean Waters Long‐Term Control Plan (LTCP) for which PWD signed a consent agreement on June 1 with the Pennsylvania Department of Environmental Protection (PaDEP). The final plan is a $2 billion 25‐year plan, rather than the $1.6 billion 20‐year plan referenced in Handout #6 and in the September 1, 2009 Summary Report provided to the CAC. It was noted that along with the ancillary benefits provided only a green approach could meet the City’s financial constraints, be implemented system‐wide, reduce overflows in all watersheds and have an immediate impact on PWD’s system. CAC members asked how the plan would be funded and if the affordability was reviewed. PWD stated that the plan will be paid for via the customer revenues. In addition, the U.S. Environmental Protection Agency (USEPA) defined affordability and that bills could not increase more than a 2.5% on an annual basis in costs related to support plan implementation. Review of Stormwater Costs At the previous meetings, several CAC members asked for additional information on the programs and services which account for PWD’s stormwater costs. As discussed in Handout #7, PWD will increasingly invest in

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• Option 2, which results in $29.0M cost reallocation by moving the conveyance pipe allocation from 70/30 stormwater to sanitary sewer to 50/50, making customer cost proportional to sanitary sewer and stormwater revenues and adjusting the strength factors

The CAC raised the following question/concerns regarding the proposed reallocation methodology following

• Changes in the Strength Factor / TSS/ BOD might adversely impact industry. It was noted that strength value is different for residential sanitary and stormwater volumes are taken into account.

• Revenue and cost are used interchangeably. Cost should be the driver vs. how revenue is captured. Goal should be to bring in enough revenue to cover stormwater costs.

• PWD needs to charge based on actual costs for stormwater and that the “people that cause the problems” pay their fair share. The flexibility to modify the allocation factors appears to undermine the validity of the $124M cost allocation presented in Handout #5.

• It may be difficult to achieve fairness in any category. A CAC member provided an example of an existing property with systems already in place and that some rate payers may feel they didn’t have complete information on their anticipated costs, which may have informed their property development decisions (e.g. purchasing a property).

Reallocation Basics The CAC then discussed the “reallocation basics” as presented in Handout #9. The following basics were noted:

• Any proposed reallocation will result in a “Zero Sum Game” • Every proposed change affects most ratepayers • Under any change some rate payers will be happy with the results while others will not be • Each rate payer will have a preference

Summary of Reallocation Analysis The CAC then reviewed the results of the reallocation analysis presented in Handout #9. It was noted that within the construct of zero sum game – there are a lot of potential options for reallocation and the impacts largely depend on how the reallocation is made. Under the two options studied: the fees don't change much for most properties; most properties facing large parcel area based charges would see their charges decrease under a reallocation; for a few, who are large sewer customers, the fees increase, particularly if they have small parcel‐based charges with significant water consumption; these customers can be identified and the degree of impact quantified. Table 1 as provided in Handout # 9 was reviewed. This table presents the categories of rate payers, preferred rate structure and average monthly fees. It was noted that averages presented can’t tell the whole tale and there may be customers in here that pay 1000% more than under the meter based stormwater charges. A member of the CAC noted that these averages were not representative of their properties and felt that a sub‐category was potentially needed under warehouses to represent large and small facilities. Table 2 as provided in Handout #9 was reviewed. This table presents the range of average monthly fees attributable to each category for the historical meter based charge, the current charges as of July 1, 2011 (FY2012), an all parcel‐based charge, reallocation option 1, reallocation option 2, and the theoretical all sewage based charge. It was noted that when looking at the reallocation proposed under option 2, most of the categories’ average fees are similar to their current fees as of July 1, 2011.



Table 3 as provided in Handout #9 was then reviewed. This table presents the “Dow Jones” list of properties, further discussed in Handout #9, and the impacts of any proposed rate change on the actual monthly fee for these actual properties across the range of rate bases and reallocation options. The impacts were discussed, noting that properties that utilize large amounts of water may see a large increase due to cost reallocation. It was noted that the average monthly fees presented account for the change in sanitary costs for each property category. The CAC asked that the additional increase in sanitary sewer charges be presented separately and the full costs to the customer be presented in a separate table. The CAC also requested copies of the current tables and any future table in excel format so that they can review and analyze the data on their own prior to the meeting. Additionally, the CAC was presented with the following table, which presents the properties which would be most burdened by the $29M reallocation option.

Property Category Total Parcels Parcels Impacted Under a 10% and $100 Threshold

Parcels Impacted Under a 20% and $200 Threshold

Parcels Impacted Under a 30% and $300 Threshold

Residential ‐ Row 349,808 n/a n/a n/aResidential ‐ Twin 70,451 n/a n/a n/aResidential ‐ Single 27,921 n/a n/a n/aAirport/Transit/Utility 464 70 36 22Apartments 17,489 180 102 61Auto Dealer 171 24 18 8Condominium 1,495 41 16 13Education 1,132 109 55 32Fast Food 292 11 3 2Government 18,224 415 247 172Healthcare 475 34 20 15Hotel 118 20 16 12Industrial Factory/Shop 1,710 215 127 82Industrial Warehouse 2,408 322 166 93Light Manufacturing 534 114 56 32Office Building 885 54 29 20Parking 4,473 58 20 11Religious/Charity 2,783 86 30 9Restaurant 694 9 1 0Shopping Center 86 45 25 17Small Business 14,137 259 139 74

Vacant 30,512 122 46 28

Total 546,262 2,188 1,152 703



The Properties Most Burdened by Reallocation Based on the available data and depending on what is deemed a measure of “significant impact” all of these potential options and their impacts are calculable. In short, many property owners do better if there is some reallocation of stormwater costs back to sanitary costs. But you will have some who go up – such as those that use a lot of water. Overall the reallocation would reduce the universe of properties that are hugely impacted compared to the path to full parcel area based charges. A member of the CAC suggested that if the number of big “losers” is relatively minor, that the reallocation funds might be better used to help the impacted parcels and do the retrofits; noting the need to consider the bigger picture and that at the moment we are considering shifting costs around to alleviate those most impacted. Thoughts – O’ – Meter The CAC was then polled along the “Thoughts‐O’‐Meter” on the range of reallocation options and asked to weigh in based on their own situations and their sense of fairness. The options and results of the poll are summarized in the table below:

“Is relocation a good step toward overall fairness and should it be pursued?” Number Option Votes

1 No Reallocation 2

2 Support $14M Reallocation (Option 1) 3

3 Support $29M Reallocation (Option 2) 1

4 Support Reallocation Higher than $29M 0

5 Other 5

The CAC members were encouraged to provide their thoughts and opinions on the options for which they voted. Those members, who voted for the “Other” option, were asked to provide an explanation as to why they voted for this option and what type of reallocation they would support. They were as follows:

• Establish the actual costs, set the rate, help outliers, extend out the phase‐in. Focus income from the fee on real expenses.

• Support for $29M reallocation or beyond while providing help to the outliers in the various categories, providing time based help/phase‐in coupled with significant incentives. People contributing sewage should pay more and help should be provided to the other groups impacted.

• Go beyond the $29M reallocation option, cap increases, make costs to implement retrofits economically viable with a quick return on investment for property owners ROI.

• More information is needed on the reallocation and how the constituency represented would be affected before a reallocation could be voted upon.

• Base the change in reallocation on reasonable science not just on helping those that may be aggrieved. The CAC asked if the reallocation options were supportable in the next rate making process and it was noted that $29M appears to be the upper limit for reallocation based on preliminary analysis. The CAC also asked if this exercise was undertaken because PWD felt that something was done wrong in the past or if it was just an adjustment to the methodology. PWD stated that they felt this was a tweak that may be justifiable as a result of



the shifting of stormwater to a parcel based charge and expressed their desire to address the properties being impacted the most. It was noted that any change undertaken by the rate case must be defensible and not arbitrary. The CAC requested that the same analysis be performed and provided to show the impact on the overall sewer bill for a given customer class. CAC Members who voted for other options provided the following commentary:

• Option 1 ‐ Going back to first principles – allocation based on peak flow seems to be a reasonable allocation and therefore supported the existing allocation

• Option 3 – Support for $29M reallocation but wants to take care of outliers as well.

Revised Meeting Topics and Schedule Based upon the previous CAC meeting, the Revised Meeting Topics are as follows:

Date Topic



June 9 Program Cost Reallocation

June 30 IA/GA Split, Residential Charges Rate Relief Topics

July 21 Special Issues: Direct Dischargers

August 11 Incentives 1 – Review of Current and Possible Incentives

September 1 Incentives 2 – Incentives and Credits Integration






Parking Lot The following questions were raised. As part of the CAC Meeting process, these questions will be answered and addressed either as part of the next CAC Meeting scheduled for June 30th if time permits or under separate cover.

Parking Lot

Details on billing, collection and other administrative costs.

Forward key tables presented in handouts and meeting as spreadsheets. Send any future tables prior to meetings.

Send all parcel area based use allocations version of tables presented.

How delta in charge spilt between stormwater and sanitary sewer as presented in Handout 9 – Tables 2 and 3 was determined and impact on full sewer bills.



Robert W. Ballenger Esq. Community Legal Services Thomas Becker Philadelphia University Paul Bonasch Perfecseal Philadelphia Jack Bonner Residential Property Owner Vincent Dougherty City of Philadelphia – Commerce Wesley Firkin UBOAP‐WTARF‐TCR; Thackray Crane Brian Franey Manko Gold Katcher & Fox (alternate for Joe Manko) Arthur Friedman Archdiocese of Philadelphia Brian Glass PennFuture Donald S Haas Brandywine Realty Trust Maia Jachimowicz City of Philadelphia – Finance Shelby Linton-Keddie Esq. McNees, Wallace & Nurick Sheilah M. Louis Esq. Philadelphia City Council – Legal Bob Martin Brandywine Realty Trust Richard McClure Kennedy Wilson Properties Anthony Tigano Chapman Auto Group David Wolf Wolf Investment Corporation


Glen Abrams Philadelphia Water Department Joseph Clare Philadelphia Water Department Andre Dasent Philadelphia Water Department Joanne Dahme Philadelphia Water Department



Other Attendees Dave Jagt Black and Veatch Prabha Kumar Black and Veatch Gerald Leatherman Philadelphia Water Department Anna Lepchuck Philadelphia Water Department Amanda Lieberman Simon Public Relations Henrietta Locklear AMEC Earth and Environmental Brian Merritt AMEC Earth and Environmental Howard Neukrug Philadelphia Water Department Pat Perhosky Philadelphia Water Department Keith Readling AMEC Earth and Environmental Andy Reese AMEC Earth and Environmental Lisa Simon Simon Public Relations Casey Thomas Philadelphia Water Department Erin Williams Philadelphia Water Department Sydina Williams Simon Public Relations Jeffrey Wolf Wolf Investments


Stormwater Utility and Rate Consultation – Credits Analysis and Recommendations Study June 30, 2011 PWD CAC Mtg 4 Summary 18JUL11 V5.docx 1

Citizen Advisory Committee Meeting # 4 Meeting Summary June 30, 2011 6:00‐8:30pm; ARAMARK Tower 1101 Market St. 15th Floor The fourth meeting of the Philadelphia Water Department’s Stormwater Citizen Advisory Committee (CAC) commenced at 6:30pm with a brief update from PWD the latest policy and programs changes.

PWD Update

D‐Permits PWD provided an update on the D‐Permits (or Discontinuance Permits) bill, noting that the proposed change in City Code was approved by City Council and the bill had been signed by the Mayor. As previously described in Handout #3, prior to the change in code, property owners who obtained a permit to permanently disconnect their water service from PWD’s water distribution system could not be charged a stormwater fee. The revised code allows PWD to charge these properties for stormwater.

Stormwater Assistance Program

PWD noted that the 30‐day public comment period for the Stormwater Assistance Program had ended on June 15th. The program went live on June 16th and is now available to qualifying customers. As discussed during CAC Meeting #2, the assistance program caps fee increases at 10 percent annually for two years on about 1,500 nonresidential properties that are slated to have a monthly increase of at least $100 each starting July 1, 2011. The program is temporary and in order to be eligible for the program, all customer utility accounts including water, wastewater and stormwater, as well as City taxes, must be current. City, State and Federal properties are not eligible for relief under the program.

Review of Charge to the CAC and Givens The Charge to the CAC was revisited: “To provide advisory opinions to PWD on topics related to rate structure, stormwater credits and incentives, and special ratepayer situations to be considered as a part of the PWD’s 2012 rates case.” The committee was reminded that “we don’t have to agree on ideas and desires, we only have to agree to have a mutually informative friendly discussion.” Additionally, the “givens,” as presented in Handout #1, were noted and that there is a set amount of revenue that needs to be recovered and that intent is that everyone “pays their fair share.” The CAC was encouraged to review the first three handouts and it was noted that the topics presented in those handouts would be covered throughout the CAC process. The topic for CAC Meeting #4 was stormwater cost allocation review and Alternative Options on Phase – In and Caps.

Stormwater Cost Allocation Based upon the discussion held during CAC Meeting #3, it was noted that the allocation of stormwater and sanitary sewer charges should be revisited during the upcoming rate case. However, following last meeting’s discussion several members of the CAC questioned whether or not the reallocation options was supportable in the next rate making process and if this exercise was science based.



It was noted that stormwater utility rate structures differ widely from location to location. The differences may reflect program goals or priorities, the influence of other policy objectives such as growth management or economic development, technical constraints, or the availability of resources such as geographical information systems or other databases. Essentially, every City does it slightly differently – they do it based on their history, what’s easiest for them, what their programs are, how they’ve grown and what their needs are. It was noted that politics and personality play their role in the establishment of rates. However, any change in the stormwater and sanitary allocation undertaken in the next rate case must be defensible and not arbitrary and would be founded upon good science. While there isn’t “wiggle room” in the science, there is “wiggle room” in how the science is interpreted. Additionally, it was noted that any changes would need to be revenue neutral and that stormwater would no longer paid for on the basis of an equivalent meter. A member of the CAC noted that they hadn’t been billed for stormwater in the past and that it was not listed separately on their bill. PWD stated that this has been the source for much of the confusion surrounding the stormwater fee, noting that customers had previously been billed on the basis of an equivalent meter and with the change to parcel area based billing, the stormwater charges were now presented separately from wastewater charges. Another member of the CAC asked whether or not the move away from equivalent meter billing meant that PWD would no longer be billing on the basis of pipe size. It was noted that the PWD would continue to use pipe size in their allocation methodology but stormwater charges would no longer be based on an equivalent water meter size as it doesn’t relate to stormwater. The CAC member also noted that PWD stormwater fee is higher than other cities. It was noted the stormwater fee is relatively high when compared to other locations and that the IA/GA charge basis, which will be discussed at a later CAC meeting, may contribute to that issue.

Reallocation Review The CAC was provided with a recap of the existing cost allocation as previously provided in Handout 5, which presented an overview of Philadelphia Water Department’s (PWD) retail cost of service allocation between sanitary sewage and stormwater. In the current allocation approach it was explained that the annual stormwater cost for Fiscal Year (FY) 2011 was $124.7 million. Of that cost, approximately $111M and $13M are attributable to stormwater IA/GA costs and stormwater billing and collection costs, respectively. Based on the concerns previously expressed by the CAC, an overview of Handout 10, which presents a more detailed explanation of the potential reallocation approach, was provided. The following topics were discussed:

• The key features of the existing approach • The issues that drive the need for re‐examining the cost allocation approach and factors • Potential allocation changes that could be considered within the boundaries of defensible engineering

and reasonable science

It was noted that the existing allocation approach was determined from reliable functional costs from PWD’s annual budget. Costs were then allocated using the following established cost allocation factors for each functional cost:

• Conveyance Cost: Piping size ratio • Treatment Cost: Flows & Strength factors • Customer Cost: Equal apportioning

The CAC was reminded that the resulting cost allocation is based on defensible science and a reasonable nexus. It was noted that the cost allocation approach currently used was established years ago and at that time it



adequately supported program needs and aligned with the customer base and meter size based cost recovery. However, with the upcoming rate case it is appropriate to review the allocation methodology at this time as a “reality check.” The methodology will be reviewed during the next rate case to address changes in program needs, to leverage new information and science, to manage customers concerns and to provide rate relief if appropriate. Review of the cost allocation recognizes that:

1. PWD’s program has evolved with an increasing focus on the long‐term control plan; 2. Stormwater cost recovery is transitioning to parcel area based charges; 3. The customer base has changed and now includes stormwater only parcels; 4. The available operation data has been significantly enhanced since the previous CAC; and 5. There are concerns from the current CAC and the broader community with regard to equity.

As detailed in Handout 10, based upon this information, PWD’s Rate Consultant, Black and Veatch, has identified the following three potential areas of change for evaluation during the next rate case:

• Change 1: Conveyance Costs ‐ allocate capital costs on the basis of peak wet weather to peak dry weather flow ratios derived from a typical year and allocate O&M costs on the basis of annual average wet weather to dry weather flow ratios derived from a typical year.

• Change 2: I&I Strength Factors – revise I&I strength factors for Total Suspended Solids (TSS) and Biochemical Oxygen Demand (BOD) used in the treatment allocation to reflect current industry practices.

• Change 3: Customer Cost – apportion customer costs based on the magnitude of sanitary sewer versus stormwater revenues.

Based upon these potential changes, it is estimated that the reallocation range for stormwater costs is between $15.7M and $24.9M. PWD’s Rate Consultant will be evaluating reallocation of the costs currently allocated to stormwater and if the evaluation supports a shift, some costs could be shifted to sanitary sewage charges. In summary, the cost allocation change factors are currently under review and any changes will need to be based on reasonable science and engineering judgment. A CAC member asked if the equivalent meter would be used to charge for sanitary usage with the shift from stormwater to sanitary costs. It was noted that these charges would be based upon water usage. Another member of the CAC noted that customers with wholesale accounts that contribute sanitary sewage flows to the system potentially limit the amount of capacity available during an overflow event to handle stormwater and asked if this was reflected in their rates. PWD’s Rate Consultant stated that they are charged for their usage of the system. It was noted that the City needs to convey stormwater and there are no natural systems left to handle the increase from the natural conditions. The CAC member stated that they felt that they were continually paying for the piping system and that it was already in place. PWD’s rate consultant stated that PWD utilizes a 30‐year bond in order to pay for construction, operation and maintenance and other associated costs. The CAC was directed to the previous provided capital costs and it was noted that Philadelphia’s system is a legacy system that needed to be managed.



The Current Path As discussed in Handout 11, PWD is halfway through the transition from equivalent meters to using a parcel area‐based fee. For most ratepayers, the change in their stormwater fee is small. This is true both for those non‐residential properties whose bills increase and for those non‐residential properties whose bills decrease. Although the change will be small for most non‐residential properties, there will be a group of non‐residential properties who have seen and will see big increases or decreases in their stormwater bills. For 1,869 non‐residential property ratepayers in FY2013 and 1,853 ratepayers in FY2014, the transition causes a large increase in their stormwater bills, defined as an increase of more than 10% and more than $100 per month. For 1,310 ratepayers in FY2013 and 1,318 ratepayers in FY2014, the transition creates a large decrease in their stormwater bill, defined as a decrease of more than 10% and more than $100 per month.

It was noted that the previously presented review of cost allocation factors indicated that one or more of the factors should be changed, which would shift some wastewater costs away from stormwater. This will ultimately impact the current transition and potentially blunt the sharpness of the change in most ratepayers’ stormwater bills. A 10‐20% reallocation will lessen the amount of both increases and decreases in stormwater bills that result from moving to fully parcel area‐based charges for most customers. However, it was noted such as shift would likely hurt some customers such as those that utilized large amounts of water.

A member of the CAC, representing the United Business Owners Association of Philadelphia (UBOAP), asked to go on record stating that UBOAP would not support the proposed reallocation. Another member of the CAC stated that they felt that the City of Philadelphia charges too much for stormwater and they were charged more than in any other City. The CAC member felt that the committee shouldn’t even be reviewing reallocation or phase‐in options as the costs were too high from the start. The CAC was directed to the City of Portland, OR and Seattle, WA which have higher charges for stormwater than Philadelphia.

Alternative Option on Phase‐In and Caps It was noted that the previous CAC did not have the benefit of the additional analysis, as the current billing system had not yet been developed or put in place. Many of the issues arising from large increases in customers’ bills were not envisioned. Based upon available information and analysis, the current CAC was asked to help evaluate ways to improve the transition, potentially further blunting the impact to customers in a way that would be considered fair and equitable. Building from the potential reallocations, the CAC was presented with a series of options and analyses centered on extending the phase‐in over an extra four or five years and potentially capping costs. It was noted that the options presented during the CAC meeting, were normalized for annual rate increase. For the purposes of discussion and the “weighing in” exercise (see discussion of weighing in versus voting on the following page), large increases and decreases were defined in accordance with the current assistance program, namely if a bill changes by more than 10% and $100/month it was considered a large change. The current transition was referred to as the “Status Quo.” As further detailed in Handout 11, there is little difference in undertaking a 4‐year versus 5‐year transition, thus only a 5‐year transition was discussed as a potential option. It was noted that capping would result in a reduction in stormwater revenue of approximately 2%; these costs are likely recoverable and are anticipated to have no impact on residential customers. It was also noted that in decreasing the rate at which some customers’ bills grow larger via either an extended phase‐in, a cap or both, this will also decrease the rate at which other customers’ bills grow smaller. Additionally, the CAC was alerted to the fact that an extend phase‐in and/or a cap would only benefit approximately 100 to 1,300 properties depending on the selected option and that a 5‐year phase‐in reduces the number of people adversely impacted depending on the percentage of reallocation.



A member of the CAC noted that they felt PWD should review and present the CAC with “real life economic costs,” looking at operating costs and what that does to those businesses impacted by the stormwater fee. PWD noted that this is a large part of why they have engaged the CAC in this process ‐ in order to hear the CAC’s range of opinions and so that the CAC can have a voice in the next rate case. Another CAC member thought someone from the revenue and commerce department should present and discuss these impacts to businesses and the potential ripple effects to the broader economy. PWD noted that the rate making process has to be fair and based on science. The process cannot focus on one business and that the rates process must stay within the parameters, givens and revenue requirements. The CAC was encouraged to stay with the process, as these concerns will likely be addressed as the meetings progress. A member of the CAC, representing the Commerce Department felt that based on the meeting topics, the CAC would eventually cover these subjects. Based on the analysis, the CAC was presented with the following options for an extended phase‐in and capping:

• No Extension • +/‐5 more years after next month • +/‐ 5 more years plus 10%/$100 per month increase for any customers

A member of the CAC pointed out that it felt premature to be voting on options for extending the phase‐in and/or adding a cap without reviewing disconnected properties, credits and incentives beforehand. The CAC member asked if they were being asked to “weigh‐in” on the subject rather than voting for a preferred approach. Another member noted that they would have difficulty voting or weighing in without understanding the economic impact and how the extended phase in would impact other rate payers – the vast majority – not just the few. It was noted that the CAC is being asked to weigh‐in at this time and would be presented with a review of the results of the meetings as well as an assessment of the potential impacts based on the changes discussed during the process. The CAC was then asked if there are any other options that should be considered. Based upon this discussion, options 4‐7, as presented in the table below were identified. The CAC was then asked to weigh‐in first as “Self,” representing their own concerns and second as a broader member of the community or “City Parent.” The results were as follows: Extended Phase‐in/Cap Options "Weigh In" "Self" "City Parent" Benefit Self Benefit Others

1 No Extension/Status Quo 4 0

2 Longer Phase in Period (+5 years) 0 0 3 Longer Phase in Period and Cap 0 4

4 Lower Threshold for "Large" Increase (5%/$50) 0 1 5 Status Quo (2 years) with Cap 1 1

6 Longer Phase in Period/Lower % Threshold/Increase $ Threshold (5%/$1K) 5 7

7 None of the Above 4 3

Total 14 16 It was noted that based on the results of the exercise that several members of the CAC had not weighed in. Several members of the CAC felt they needed more information in order to provide their opinion and wanted to know how the transitions would impact rate payers, PWD’s revenue and broader program goals.



Revised Meeting Topics and Schedule The revised CAC meeting, the Revised Meeting Topics were noted as follows:

Date Topic



June 9 Program Cost Reallocation

June 30 IA/GA Split, Residential Charges Rate Relief Topics

July 21 Special Issues: Direct Dischargers

August 11 Incentives 1 – Review of Current and Possible Incentives

September 1 Incentives 2 – Incentives and Credits Integration




Parking Lot No questions were noted as “parking lot” questions during the June 30th CAC Meeting.



Thomas Becker Philadelphia University Paul Bonasch Perfecseal Philadelphia Jack Bonner Residential Customer Michael Carter Manko Gold Katcher & Fox (Alternate for Joe Manko) Michael Chapman Chapman Auto Group Vincent Dougherty City of Philadelphia – Commerce Wesley Firkin Thackray Crane / UBOAP Arthur Friedman Archdiocese of Philadelphia Brian Glass PennFuture

Patrick Gregory McNees, Wallace & Nurick (Alternate for Shelby Linton-Keddie)

Donald S Haas Brandywine Realty Trust Josie Hyman Community Legal Services (Alternate for Robert Ballenger) Maia Jachimowicz City of Philadelphia – Finance Sheilah M. Louis Esq. Philadelphia City Council – Legal



Lisa Magee Philadelphia Regional Port Authority Richard McClure Kennedy Wilson Properties Joseph Pyle Scattergood Foundation Harvey Rice City Controller’s Office David Wolf Wolf Investment Corporation / UBOAP


Michael Borchers Black and Veatch Jeremy Chadwick Philadelphia Water Department Andre Dasent Philadelphia Water Department Joanne Dahme Philadelphia Water Department John Digiulio Philadelphia Water Department Alister Erickson-Ludwig Philadelphia Water Department Alison Etinoff Boston University Mami Hara City of Philadelphia Dave Jagt Black and Veatch Prahba Kumar Black and Veatch Gerald Leatherman Philadelphia Water Department Anna Lepchuck Philadelphia Water Department Amanda Lieberman Simon Public Relations Henrietta Locklear AMEC Earth and Environmental Christine Marjoram Philadelphia Water Department Brian Merritt AMEC Earth and Environmental Keith Readling AMEC Earth and Environmental Andy Reese AMEC Earth and Environmental Michael Romankiewicz Philadelphia Water Department Casey Thomas Philadelphia Water Department Sydina Williams Simon Public Relations Alex Wolf Wolf Investments

CAC Meeting #5 Summary July 21, 2011


Citizen Advisory Committee Meeting # 5 Meeting Summary July 21, 2011 6:00‐8:30pm; Courtyard Marriott ‐ Philadelphia Downtown ‐ Juniper Room/Mezzanine Level 21 North Juniper Street Philadelphia, PA The fifth meeting of the Philadelphia Water Department’s Stormwater Citizen Advisory Committee (CAC) commenced at 6:30pm with a brief recap of the previous CAC Meetings.

Review of Previous Meetings The charge to the CAC was revisited and it was noted that the group is intended to be advisory, not a policy making group; therefore, the group does not need to reach consensus. The broad range of opinions does not need to be reconciled but PWD wants to understand the range of opinions and concerns of the committee members. The CAC does not need to agree on ideas and desires, only to agree to have a mutually informative friendly discussion. It was noted that to date we have discussed the current stormwater programs, costs and allocation methodology. The previous meeting focused on extended phase‐in and capping options that could potentially be utilized to assist those rate payers most affected by the current transition in the stormwater fees. A quick recap of the previous CAC meeting was provided. A summary of the Extended Phase‐in “Weigh In“ was presented and the CAC members were asked if they had any additional questions or comments on the results of the “Weigh In” exercise. The CAC members had no additional comments. Please refer to the previously provided CAC Meeting # 4 Summary handout for additional information and details on the “Weigh In” Exercise and subsequent results. As the majority of meetings to date focused on rate relief, the CAC was reminded that Meeting #5 will focus on Direct Dischargers and Meeting #6 will cover the IA/GA Concept. During these discussions the concept of credits will be touched upon, but the CAC will be provided with a more in depth discussion of credits in future meetings. The CAC was also reminded of the “Objective Criteria” established during the first meeting and asked to keep these concepts in mind while considering the subject of Direct Dischargers and throughout the remaining meetings.

Direct Dischargers

Definition of Direct Dischargers The discussion began with a description of Direct Dischargers (DDs). DDs are properties that directly discharge some or all stormwater runoff from their parcels into natural drainage ways (these properties are typically adjacent to streams or rivers), or discharge through a private conveyance system (not constructed or maintained by PWD). It was noted that some properties could be receiving partial credit, as a portions of the site may be draining to a natural drainage way while other portions may not.



Questions for the CAC As discussed in Handout 12, it was noted that that the CAC’s discussion and focus will be on fairness and equity, not on the wording contained in various PWD regulations and code or the origin of and logic that lead to the current policy. The CAC was asked to consider the following questions:

How should Direct Dischargers be handled with respect to the user fee and credit system?

Should Direct Dischargers be handled differently from other rate payers; and if so, on what basis?

What is fair, equitable and consistent with the handling of the rest of the ratepayer charges? More broadly the CAC was asked, when thinking about DDs, if these properties get a credit – what makes them different from other properties and is it a CREDITABLE difference? Members of the CAC who are or represent DDs were encouraged to share with the group why they felt they should receive credit. A member of the CAC noted that he had a property that he would like to be considered as an example during the meeting and was asked to bring it up during the example discussion.

Current Situation The interim solution and current regulatory interpretation were discussed. Similar adjacent properties may pay very different fees and that a property’s location is essentially what would make it eligible for credit under this interpretation of the credit policy. The CAC was then presented with a series of “hypothetical” sample properties along the Delaware River and a Small Tributary in Philadelphia as provided in Figures 1 and 2 below.

Figure 1 ‐ Delaware River Hypothetical Direct Dischargers Examples



A CAC member asked, if they were able create their own private drainage system and “untie” from the PWD under a highway. Another CAC member asked if they had a property which was a partial DD, could they redirect runoff to the DD portion of their property. It was noted that these options are possible; however any changes in the current runoff regime would require any necessary approvals (e.g. local, state and federal). If runoff is newly directed to an adjacent parcel, consent from the downstream owner would need to be provided and a waiver would need to be filed with PWD. A member of the CAC noted that his property was presented on the small tributary example slide and that they were adjacent to a DD that was receiving credit but because the property discharged to a PWD system, he could not receive credit nor could he install any SMPs to achieve the same level of credit.

Factors for Consideration The CAC was then presented with the following factors for consideration as discussed in Handout 12

1. Magnitude of the issue in terms of numbers of properties and total revenues 2. Impact on individual properties of potential current policy change 3. National practice and specific examples 4. Rational nexus and fairness considerations

Magnitude of the issue ‐ If all the estimated 1,400 non‐residential property owners that have the potential to be consider DDs, received credits that the overall loss in stormwater revenue could total as much as $21.5M or roughly 17% of the total stormwater revenue. As a result, the stormwater rates for all other property owners would need to go up to cover the reduction in revenue. Additionally, the loss of revenue associated with the 45

Figure 2 – Small Tributary Hypothetical Direct Dischargers Examples



properties, which are currently receiving credit, will total approximately $2.4M once the stormwater charge transition was complete. Impact on individual properties ‐ The potential impact due to any changes in policy on the 45 individual current credit holders was discussed as well. The CAC was informed that the charges for these properties would go up four fold if the credit was removed. Both the revenue requirements and the impact to customer should be considered. It was recommended to the CAC that any Extended Transition/Phase‐In or Cap Increase recommended in the next rate case also be extended to anyone that would potentially be impacted by changes in PWD policy. A CAC member asked why so few properties currently received credit and what is different about these properties that they haven’t applied? PWD noted that the potential number of DDs presented to the CAC is an estimate. The biggest deterrent for many of these properties is the fact that they typically do not have a stormwater plan/utility plan that shows their existing infrastructure, which is a requirement in order to determine credit eligibility. It was noted that some of the properties identified as potential DDs might actually tie into PWD’s system. Another member of the CAC noted that they‘ve been inundated with offers from engineering companies to evaluate their properties. National Standard of Practice – The CAC was then presented with several examples of how other cities handle DDs and that most locations do not recognize DD categorically for fee reduction. A CAC member felt that this technically be true for Philadelphia as well as there are currently no regulations that recognize DDs. It was noted that DDs are not directly addressed; however, the current regulations were being interpreted in a way that was unforeseen; hence the need to revisit DDs with the CAC and in the next rate case. The CAC was presented with several examples of how locations that do recognize DDs currently handle them. In summary, those that do provide a

1) A partial reduction because properties discharge into system not touched by the utility; 2) A partial reduction because part of the utility’s program (such as flood control) does not apply to

DDs; or 3) Full exemption as these properties are not considered stormwater customers and do not place a

demand or benefit from any program, policy or spending. A CAC member asked for properties that don’t enter into PWD system ‐ What gives PWD the right to charge for this and what makes this different from a tax? What gives PWD the right to charge these properties if they’re charged based on their location? It was noted that under the current interpretation, DD properties only receive IA credit based on the stormwater management guidance via the Disconnected Impervious Area (DCIA) Credit. PWD does not grant these properties GA credit as it is related to detention requirements and there is no scientific basis for which this credit would apply to DDs. The CAC was provided with an example of how a new credit system could be implemented in Philadelphia. As PWD does not currently spend money on flood control for properties along the Delaware and Schuylkill Rivers and it is estimated that 50% of PWDs program cost are associated with flood control, these properties could be granted a credit of 50% on their IA/GA charges. This approach assumes that the updated credit program that results from this CAC process would be tied to the program costs.



A member of the CAC noted that while these properties might not contribute to flooding they would still be concerned about water quality; noting that they have seen the evidence of physical pollution (floatables) along properties nearby these major rivers. The CAC member felt that all properties that discharge to streams and rivers have the potential to contribute pollution and they should bear some responsibility to clean/manage their runoff from a water quality perspective. Another member of the CAC felt that PWD only touches about 4% of the Delaware River and that trash could come from as far away as New York and that the impacts to water quality from Philadelphia are relatively small. PWD noted that there is a large drinking water component to consider and that the Delaware River is the source for the City’s drinking water supply. PWD is also responsible for removing trash, known as floatables, and there is a cost impact associated with floatables for all water bodies. General Fairness The CAC was then asked to consider the general fairness of the current interim policy and were presented with various arguments and counter‐ arguments that could be made around DD related issues. A member of the CAC thought that DDs might be taking advantage of a loophole simply based on the current definition, stormwater management guidance and credit policies. While DDs may feel that they do not discharge to PWD’s system therefore they don’t cause costs or benefit from PWD’s programs, the CAC was reminded of the forward looking budget, discussed during Meeting #3, which noted costs associated with stream protection including clean‐up, stabilization, water quality and flood control management. The impacts of urbanization on streams were discussed including the loss of land and erosion within stream and overbank areas, eutrophication, and loss of aquatic life. PWD noted that it is responsible for keeping every flowing body of water in the City both safe and clean. With regard to costs, it was noted that DDs which don’t treat their discharges are essentially “mainlining pollution“ into the stream. At the same time, DDs benefit from the stream itself and because of this some locations such as Boulder, CO impose a surcharge on DDs. Additionally, DDs benefit, as do all property owners, from PWD management of the inlet and stormwater system which keeps roads from flooding. It was noted that arguments could be made both for and against the current policy and that the CAC would be asked to provide their thoughts and opinion on how best to address DDs.

Options Before the CAC considered the various options to address DDs, they were asked if they had any additional questions. A summary of the discussion was as follows:

A CAC member asked how the 95% of the Cities that don’t directly address DDs pass rational nexus test. These Cities consider the benefits DDs receive from flood control and other programs as well as other programs. Another member of the CAC noted these properties benefit from flood control programs and that for properties on the Delaware and Schuylkill there are no flood control costs for PWD. Another member noted the importance of the water quality component of this issue.

A member of the CAC asked if the current regulations have any restriction on DDs if they redevelop their properties. PWD noted that they would be subject to the current stormwater management requirements.

A member of the CAC noted that DDs impact the system much less than others and similarly if special dispensation for properties in separately sewered areas should be considered versus those in CSO areas. It was noted that while at times costs may have a different focus between these two areas, costs are not unequal between the two areas.



The CAC was then presented with the following options

• Option 1 – No Special Recognitions of DD disconnection ‐ DDs would be eligible for credits for onsite management only;

• Option 2 – Little or No Change from Now ‐ DDs get credits when they apply as DDs. DDs would only qualify by discharging into surface waters;

• Option 3 – Recognition of Schuylkill and Delaware ‐ DDs would receive “flood control credit” of ~50%. All others get credits for on‐site management; and

• Option 4 – Recognition of Some Reduction Based on Credits ‐ Basis for and amount of the credit available is not defined yet.

The CAC was then asked if any additional options should be considered. A CAC member recommended that Option 2 might be agreeable to most members if an environmental protection requirement was added (e.g. meet the water quality requirements based upon the current regulations). This option was added as Option 5. Prior to “Weighing In,” the CAC was asked to offer up their views and opinions on how DDs should be handled. This discussion is summarized in the table below:

Name Affiliation How should DDs be handled?

Robert W. Ballenger Esq. Community Legal Services Option 1 or 4 ‐ open to the idea of both. The Credit structure should be open and flexible to determine the correct charge.

Thomas Becker Philadelphia University

Can the definition of a direct discharger be part of the discussion? If a DD is not going to sewer – is that different? I think their water is different than water that goes to a treatment plant.

Paul Bonasch Perfecseal Philadelphia As a DD, we also have costs that should be recognized. Would be for Option 4 – some credit but not all.

Jack Bonner Non‐sewered area homeowner

Recognize water quality but based on actual costs. Looking at this as a residential property, we gave consideration to location and we do not call PWD when our system fails (storm or sanitary sewer). This is recognized by PWD. Concerned about how $2B in the future takes care of streams and CSO issues – how is that going to be handled?

Michael Chapman Chapman Auto Group DDs should treat for water quality.

Michael Carter Manko, Gold, Katcher & Fox Option 2 – DDs don’t get special consideration from a legal perspective. Additionally there are limits on what PWD can pay for in terms of



Name Affiliation How should DDs be handled? infrastructure. If we were to go to Option 3 – other credits should still be available.


Struggling with cost allocation / what is the proper allocation of the costs? I’ve seen my property flooded. DDs deserve credit but don’t know enough on how to establish the proper credit.

Wesley Firkin Thackray Crane / Unified Business Owners Association

I fall under Option 2 – I can’t reject the fact that DDs properties contribute contaminations. I don’t think Option 1 is the answer but would allow for some credit if DDs treat for water quality.

Arthur Friedman Archdiocese of Philadelphia Lean toward Option 1 – most of our properties fall into this category.

Brian Glass PennFuture

Option 4 – Would like to see a Buffer Requirement enacted.

Donald S. Hass Brandywine Realty Trust

Closer to 4 on this topic. What is really fair is that everyone should pay their fair share. There is a huge swing between Options 1 and 4. Any change that is made should be tied to logic and science.

Bob Martin Brandywine Realty Trust Lean toward Option 1 – DDs benefit from all of PWD’s programs in some way


We have properties that fall in to all categories – Prefer Option 3

Richard McClure Kennedy Wilson Properties

Option 3 ‐ Recognize these properties as long as they are good environmental stewards.

David Wolf Wolf Investment Corporation/Unified Business Owners Association

Currently has not sought direct discharger credit, although may qualify. As a responsible owner, I would want everyone who is DD to address their environmental impacts – Water Quality is most important.

Additional considerations noted by the CAC membership included:

Should separate vs. combined areas pay on a different basis? An extension of the direct discharge concept.

Are there any rate structure options that would recognize the difference between rural vs. urban lands? Revisit and revaluate the recommended polices put forth by the first CAC.



Following the discussion and with the addition of Option 5, the CAC was asked to “Weigh In” and select their first and second favorite options. The results of the selection are provided in the table below. Note, that the first favorite option is weighted twice as heavily as 2nd favorite. While some CAC members would prefer the current policy to remain in place, most members would likely say that a change in policy is warranted and these options should be further explored during the next rate case.

How should direct dischargers be handled?

Option Description 1st

Favorite Results

2nd Favorite Results

Total Weighted Total

1 No special recognition of DD disconnection

4 2 6 10

2 Little or no change from current approach

1 1 2 3

3 Recognize properties that directly discharge to the Schuylkill and Delaware Rivers on the basis of flood control

6 3 9 15

4 Special credit/some recognition for DD 3 6 9 12

5 Option 2 with added requirement that DDs address water quality requirements to receive credit

1 3 4 5

Remaining Meeting Topics and Schedule The remaining CAC meetings and the Topics are follows:

Date Topic

August 11 IA/GA Construct

September 1 Incentives




A revised meeting roadmap has been attached to this meeting summary for further information on specific meeting agenda items.



Robert Ballenger Community Legal Services Thomas Becker Philadelphia University



Paul Bonasch Perfecseal Philadelphia Jack Bonner Residential Customer Michael Carter Manko, Gold, Katcher & Fox Michael Chapman Chapman Auto Group Vincent Dougherty City of Philadelphia – Commerce Wesley Firkin Thackray Crane / UBOAP Arthur Friedman Archdiocese of Philadelphia Brian Glass PennFuture Patrick Gregory McNees, Wallace & Nurick Donald S Haas Brandywine Realty Trust Bob Martin Brandywine Realty Trust Lisa Magee Philadelphia Regional Port Authority Richard McClure Kennedy Wilson Properties Harvey Rice City Controller’s Office David Wolf Wolf Investment Corporation / UBOAP


Joanne Dahme Philadelphia Water Department Andre Dasent Philadelphia Water Department John Digiulio Philadelphia Water Department Prabha Kumar Black and Veatch Gerald Leatherman Philadelphia Water Department Anna Lepchuck Philadelphia Water Department Amanda Lieberman Simon Public Relations Henrietta Locklear AMEC Earth and Environmental Christine Marjoram Philadelphia Water Department Brian Merritt AMEC Earth and Environmental Pat Perhosky Philadelphia Water Department Andy Reese AMEC Earth and Environmental Michael Romankiewicz Philadelphia Water Department Casey Thomas Philadelphia Water Department Erin Williams Philadelphia Water Department Sydina Williams Simon Public Relations

CAC Meeting #6 Summary August 11, 2011

Stormwater Utility and Rate Consultation – Credits Analysis and Recommendations Study August 11, 2011 PWD CAC Mtg 6 Summary 11AUG11 V3.docx 1

Citizen Advisory Committee Meeting # 6 Meeting Summary

August 11th, 2011 6:00-8:30pm; Courtyard Marriott - Philadelphia Downtown - Juniper Room/Mezzanine Level - 21 North Juniper Street Philadelphia, PA The sixth meeting of the Philadelphia Water Department’s Stormwater Citizen Advisory Committee (CAC) commenced at 6:30pm with an update on the proposed meeting schedule and brief recap of the previous CAC Meetings.

Update – Open Discussion

Following the previous meeting, a member of the CAC requested that an open discussion period be provided at each meeting. It was agreed that during the remaining meetings, an informal 20 minute session for free and open discussion will be held after the scheduled meeting topic and agenda had been covered. All CAC members are welcome to stay and participate or are free to leave. PWD and the consultant team will not act as moderators during this time and there will be no set agenda.

Review of Previous Meeting

The charge to the CAC was revisited and it was noted that the group is intended to be an advisory and not a policy making group; therefore, the group does not need to reach consensus. Again, the CAC doesn’t need to agree on ideas and desires, only to agree to have a mutually informative friendly discussion. The previous meeting focused on direct discharges, the scope of the potential issue and how it can impact both the broader environmental goals and responsibilities of PWD as well as the potential to impact stormwater revenue and the associated fees. While some CAC members would prefer the current policy to remain in place, most members felt that a change in policy is warranted and that options for change should be further explored during the next rate case.

Gross Area Overview

As detailed in Handout 13, the original CAC recognized that everybody contributes stormwater runoff that needs to be managed and impervious area contributes more than pervious. Thus, impervious surfaces should pay more but pervious should still pay something. Gross parcel area (GA) was considered to be the best indicator of the base level of such runoff. The original 80:20 formulation was based on the runoff method called the Rational Method and focused on Peak Flows. This methodology shows that pavement generates about four times the peak flow of grass and the IA contribution is therefore four times the GA portion. A member of the CAC asked how the original 80:20 split resulted in an “8:1 difference” in the final charge - this is likely due to the way the final CAC report expressed the formulation. Impervious area is factored into both the GA and IA charge, and when charges are assessed on a site specific level– the actual split ends up closer to 90:10 than 80:20. Another member of the CAC asked if others used the IA/GA formula. It was noted that while no utilities use the exact same formula as PWD to establish their charges, approximately 15% account for GA in some way. A CAC member added that of the utilities he reviewed, only two charge for gross area.



GA Credit

The current GA Credit was presented. In order to obtain credit the property owner must demonstrate a National Resource Conservation Service Curve Number (NRCS-CN) of 86 or less for the entire area within the property boundaries. The Curve Number (CN) represents the runoff characteristics for a particular soil and ground cover. PWD applies a 7% reduction from the GA Charge for every whole number below 87 that a property can achieve; it is possible that a CN of 72 may yield the maximum allowable 100% GA Credit.

CN and Soils

The CAC was presented with a breakdown of the NRCS hydrologic soil types within the City. Of the lands located within Philadelphia 37% are Type B Soils, 6% are Type C soils, 1% are Type D Soils and 56% of the land is classified as Ub Soil or “urban modified” soils. Based upon the Stormwater Management Guidance Manual – Ub soils are treated in a manner similar to undeveloped land with underlying Type B soils. A member of the CAC asked if the City knew the type of soils present on a site, why should they hire an engineer to make the determination and apply for the credit. They felt that properties should receive credit automatically. PWD stated that in working with customers, they have performed these calculations. It was noted that the publicly available soils data can be highly inaccurate in very urban areas. PWD is evaluating the credit; hence, the need to discuss this topic with the CAC. It was also noted that based on the current credit methodology, properties with D soils cannot get credit due to the CN assigned to the soil type.

Current Stats

The number of properties currently receiving credit is 240. Of those, 141 properties are receiving 100% credit on their GA charge. The overall credit results in a reduction in revenue of $1.68M annually, realized as savings to the property owner. The average credit provided is $7,000/year and accounts for 73% of the available GA credit. The theoretical upper limit for the total available GA Charge (assuming all properties eligible) would be $22M per year. The “TOP 500 GA” properties, which have the highest GA fees, were discussed. These properties account for the following:

18,200 Acres

$34M in revenue annually

$8.5M in GA charges

$1.5M in GA credits are provided to a total of 70 properties

32% average impervious area coverage Seventy of these properties receive credit, the majority of which are privately owned. For the most part, publicly owned properties have not yet taken advantage of the GA credit to date. A Conrail property was shown as an example. The parcel is charged $163,188 annually and of that fee $100,600 is for GA charges. The property receives no credit and only 8% of the area is considered impervious.

Inequities and Inconsistencies

The CAC was presented with some of the inequities and inconsistencies that have resulted from the current GA charge and the associated crediting mechanism, namely:

• Some properties pay a high GA fee • Properties with trees may pay the same GA fee as properties with grass • Property owners have to apply for credit to recognize existing site conditions • Property owners who have properties with poor soils (e.g. Type D) cannot get any GA credit



• Some large properties pay zero GA charge even though they have turf grass which is not equivalent to having a wooded or forested lot (from a stormwater management perspective)

The key issues arising from these inconsistencies and inequities were then discussed.

Key Issues

Issue #1 – The charge seems unfairly high for some large properties while others pay no fee. The “tennis court” example discussed in Handout 13 was presented. It was noted that this site, which is 3.5 acres in size and wooded over half its overall lot, pays $3,890.04 annually of which $1,835.61 is GA charge. This particular property generates little revenue in order to pay the bill and may not be eligible for credit due to the underlying soil type. The impact of adjusting the charge basis from 90:10 to 80:20 was then discussed in light of PWD’s increasing focus on runoff volume to meet program and permit requirements. By shifting the charge basis from 80:20 to 90:10, the revenue from GA charges would be cut in half while revenue from IA charges would need to increase by approximately 13% to capture the $11.1M no longer generated via GA. The shift in charges was further explained by comparing the shift in charges on a one acre parcel as presented in Figure 1. A member of the CAC asked why the actual charge is closer to 90% currently, and it was explained that part of the reason is that impervious area is accounted for in both the IA and GA areas. The addition of non-paying accounts (aka bad debt) further raises the base IA rate.

Figure 1: 80:20 vs. 90:10 Split Comparison

Issue #2 – The charge penalizes those with poor draining soils – something they had no part in creating. As discussed in Handout 13, the current GA charge construct and credit methodology creates a situation where some properties cannot attain the credit no matter what they do. The resulting issue was illustrated via Figure 2 which shows the potential GA credit based upon a site’s impervious percentage, NRCS CN and soil type. While 92% of the City is considering NRCS Type B:

Properties with greater than 58% impervious area have no possibility of receiving GA credit;



Properties with 10% to 58% impervious area will only be eligible for limited GA credit; and

Properties with less than 10% impervious area can potentially received 100% GA credit. Additionally, it was noted that good forest on properties with greater than 58% IA, wouldn’t be recognized because of the current GA construct and largely due to CN method for determining credit.

Figure 2: GA Credit Potential

Issue #3 – The GA credit reflects an intrinsic characteristic of the parcel, yet parcel owners must apply for it The fact that property owners must apply for credit to reflect the existing conditions on their property was discussed and it was noted there may be automated methods available that could potentially automate the credit process. It would take some time, at least a year, to obtain and process the data and apply the “credit.” It would result in costs to PWD to update their databases, billing and management systems. A member of the CAC asked if the City knew what the soils were on each parcel. It was noted that the City has general information on soil conditions based upon the NRCS soil data but that it is not always accurate, thus PWD accepts soil testing from engineers and geologists and soil scientists. Another member of the CAC asked if the engineers who had contacted his business to perform this analysis were engineers being disingenuous. It was further discussed that generally the available soils data may be inaccurate for a given site and all engineers should want to document and verify the actual site conditions if they were required to sign or seal documentation or if they would be potentially held liable for their findings. Issue #4 – There is little incentive to make better use of open space. It was noted that open space costs the same “no matter what.” As an example the CAC was presented with the costs for a single acre of open space, which would be charged $557.57 per year regardless of the cover type. Therefore, a forested lot would pay the same as a grassed lot but the runoff from a forested lot amounts to approximately 18% of the runoff from a grassed lot.

What are possible options?

The CAC was presented with some potential options as identified by PWD and the consultant team:



Option 1 – Change the GA Credit - Revise the credit so that it is based on land cover only (i.e. trees) and not soils

Option 2 – Create an automatic “Good open space” credit - Credit GA that reduces stormwater demand and make it automatic based on remote-sensing data

Option 3 – Change ratio for IA:GA revenue recovery - Investigate the current split and identify a scientifically defensible change which emphasizes runoff volume

The CAC members were then asked if they had any other ideas to potentially address the situation. The table below summarizes the ideas from this discussion and ranks them based upon the feedback provided by the CAC during the meeting.

In summary, a strong interest in automating the credit process in some form was expressed by CAC members. Consideration for soils and tress should be investigated and “good’ open space should be encouraged or rewarded if possible. Additionally, much of the discussion focused on fairness and PWD’s customer focus. The discussion also revealed several other themes:

Customers should be made fully aware of their charges, available credits and appeals process.

No. IA/GA Charge - Ideas for Change RANK

1 Differentiate between trees, grass and impervious surface types - get closer to fairness RANK 1

2 Automate the credit but keep soils as a consideration RANK 1

3 Give credit for things that can be changed by the landowner RANK 1

4 Fully notify customers of available credits RANK 2

5 Litmus test - any option needs to encourage open space RANK 2

6 Tier green space automatically / provide data customers and establish appeals process RANK 1

7 Extra credit for trees RANK 1

8 Credits should reflect program costs for both peak and volume NO RANK

9 Shift charge split from 80:20 to 90:10 NO RANK

10 Sponsor Credits on other properties / Credit Banking option NO RANK

11 Balance available credits with administrative costs NO RANK

12 Drop GA Fee / Charge only for IA Only NO RANK

13 Differentiate between Income and Non-Income Producing Properties for GA Charge NO RANK

14 Consider affordability via caps - declining block NO RANK

15 Amended Soils Credit NO RANK

16 Properties Should be Charged for Stormwater Cost Burden to PWD RANK 2

17 Require City certification for Property/Include Soil Type in Agreement of Sale NO RANK

18 Properties Pay Fair Share with Consider of Water Quality and Flood Control RANK 2

19 Balance of Impact of Goals/Cost on Others/Don't Penalize to Advance Goals of City NO RANK

20 Base charges on actual cost to the utility - Cost of Services Principals NO RANK



There is a tension between the program focus on peak flow and runoff volume which is impacting the underlying charges. Some CAC Members felt this should be better reflected in the charges as well as in the credits and incentives programs.

The focus of any credit should be on what property owners can do – not an inherent characteristic of their property.

Much of the membership felt that green space is valuable and any charge and/or credit should not act as a disincentive – resulting in the development of these areas. A member of the CAC offered up that differentiating between revenue generating and non-revenue generating properties may be a way to address this.

Some members of the CAC felt that more information should be made available or perhaps included in property deeds so that potential stormwater related issues or resulting charges were readily known to all. Other members countered that these considerations and investigation should be part of any normal due diligence process a business undertakes while assessing a land/property purchase.

Any proposed change should be evaluated so that any additional administrative expenses are understood before choosing to implement.

Members of the CAC recognized that any change to the GA charges would potentially shift costs to IA charges.

A member of the CAC felt that if “trees” are recognized or rewarded – any policy should be well defined and defensible.

A member of the CAC, whose business has invested in stormwater management on their site, felt that properties should pay their fair share and credits should be appropriately aligned to what property owners do on their site. Another member furthered this point by stating that the credits should reflect the benefits of on-site stormwater management as they relate to flood protection and water quality management and that credits should recognize / be proportional to benefit to the City stormwater programs – and given proper weight.

Remaining Meeting Topics and Schedule

The remaining CAC meetings and the Topics are follows:

Date Topic

September 1 Incentives


October 13 Credits 2 –Other Credits







Paul Bonasch Perfecseal Philadelphia

Jack Bonner Residential Customer

Michael Carter Manko, Gold, Katcher & Fox (Alternate for Joe Manko)


Wesley Firkin Thackray Crane / UBOAP

Arthur Friedman Archdiocese of Philadelphia


Patrick Gregory McNees, Wallace & Nurick

Donald S Haas Brandywine Realty Trust

Maia Jachimowicz City of Philadelphia – Finance

Bob Martin Brandywine Realty Trust



Josie Pickins Community Legal Services (Alternate for Robert Ballenger)

Joe Pyle Scattergood Foundation

David Wolf Wolf Investment Corporation / UBOAP

Other Attendees


Joseph Clare Philadelphia Water Department

Joanne Dahme Philadelphia Water Department

Andre Dasent Philadelphia Water Department

John Digiulio Philadelphia Water Department

Prabha Kumar Black and Veatch

Gerald Leatherman Philadelphia Water Department

Anna Lepchuk Philadelphia Water Department

Amanda Lieberman Simon Public Relations

Henrietta Locklear AMEC Earth and Environmental

Christine Marjoram Philadelphia Water Department

Deb McCarty Philadelphia Water Department

Brian Merritt AMEC Earth and Environmental

Andy Reese AMEC Earth and Environmental

Michael Romankiewicz Philadelphia Water Department

Erin Williams Philadelphia Water Department

Sydina Williams Simon Public Relations

CAC Meeting #7 Summary September 01, 2011

Stormwater Utility and Rate Consultation – Credits Analysis and Recommendations Study September 7, 2011 PWD CAC Mtg 7 1SEP11 V4.docx 1

Citizen Advisory Committee Meeting # 7 Meeting Summary September 1th, 2011 6:00‐8:30pm; Courtyard Marriott ‐ Philadelphia Downtown ‐ First Floor 21 North Juniper Street Philadelphia, PA

The seventh meeting of the Philadelphia Water Department’s Stormwater Citizen Advisory Committee (CAC) commenced at 6:30pm with a brief recap of the previous CAC Meetings.

Review The meeting began with a review of the CAC charge, followed by an overview of the top‐ranked ideas for GA credit alternatives that were posed by CAC members during Meeting 6. The summarized top‐ranked ideas were explained and it was indicated to the CAC that the ideas had been debated and discussed with PWD. Then, to orient the CAC to the role of incentives, a brief recap of the issues that have been discussed with the CAC followed. The two key areas of basic cost reallocation and extended phase‐in/capping affect everyone’s fees all at once and “raise or lower the tide” affecting everyone’s fees at the same time, whereas incentives act more as rewards to motivate customers to take actions that meet PWD and ratepayer goals as the incentive investment benefits all parties.

Incentives The fundamental difference between “incentives” and “credits” was explained. Incentives are one‐time, targeted assistance – rebates/cost sharing, discounts, special recognition ‐ that serve as an impetus to initiate some stormwater reduction measures to address specific problems such as volume control, quality enhancement, etc. The reason incentives are offered is because there is a public interest in a specific action being taken that results in a more cost effective solution than if PWD took the same action.

Economic Analysis In this meeting, the Department’s economic consultant, Econsult Corporation, presented some of the findings from its study, as they related to the need and identification of particular incentives that fit the needs of impacted stormwater customers. Econsult presented and provided a brief background of the firm. Econsult is a Philadelphia‐based firm that has been providing high‐quality economic analysis in Philadelphia for over 30 years. For example, Econsult recently performed a Vacant Land analysis for the Philadlephi Redevelopment Authority; completed a tax impact and reform analysis for the the Govern of Pennsylvania’s administration; and evaluated the Philadelphia’s 265 commercial corridors and what incentives the City can provide to stimulate economic development.

Econsult was tasked with analyzing the impact of stormwater user fees on businesses in Philadelphia. The analyses performed, including the categorization of parcels, were explained. Econsult compared the charges under the equivalent meter based charge versus the parcel area based system of charges. Statistics on the charge impact on non‐residential parcels were provided to the CAC. In summary, the number of parcels with

• Decreased bills ‐ 4,498; • Increased bills ‐ 25,442; and • New bills ‐ 20,453.



A CAC member asked how many parcels experienced an impact of more than $976 per year, which was the average increase. To further illuminate this figure, Econsult presented further information on the magnitude of fee impacts. Econsult explained that 19 out of 20 parcel owners see an increase of less than $3,000 and one in 20 see an increase of greater than $3,000. 120 parcels will experience not only a significant percent increase (500%) but also significant dollar increase ($25,000). These 120 comprise less than 0.2% of the total parcels in the City. Econsult also conducted a relocation analysis to understand if the stormwater fees impact the potential for a business to relocate from the City. This analysis evaluated the overall costs of doing business in the City in some of the most mobile commercial sectors (e.g. warehouses, distribution centers, etc) and took a long term view that encompassed many factors (taxes, other utilities, employee wages, and customer base). In most cases, it was concluded that businesses would not move solely as a result of the stormwater fee. The fee does not impact the characteristics of the business, but impacts the characteristics of the land – meaning the value of the land could potentially decrease unless some action was taken to negate the higher stormwater fee. In the short run, the fees will go to the owner of the commercial property but in the long run will likely be passed on to the occupant through a lease negotiation/renegotiation. A CAC member asked if the Navy Yard was exempt from SW charge. The Yard is charged. Universities were not included in the greater than $25,000 fee increase analysis. Econsult only evaluated for profit organizations. A CAC member asked if Econsult looked at wage tax as a part of costs and whether the CAC would be provided details of the analysis. Econsult did look at these and other costs and the final report will include these details. A CAC member asked if Econsult was able to quantify the overall cost to the City due to the reduction in values of the property due to the stormwater charge impact. A CAC member opined that the value of the office building may not go up if stormwater bills are reduced; the reduced charge will just translate to reduced leasing costs. Econsult did quantify this cost and the magnitude of the cost is in the millions, rather than tens of millions of dollars. A CAC member asked if Econsult compared how much City property tax revenue could potentially go down versus the revenue increases to PWD. Econsult did not. A CAC member pointed out that his property is significantly impacted, to the tune of $440,000 per year; for which he applied and received some property tax reductions. The member wanted to know the amount of the incentives that are available. This member felt that they couldn’t sell their property in today’s market, couldn’t include the stormwater charges in lease renewals, and could not leave the City at this time. Currently, his businesses’ profits are reduced and impacted by the fee. The member opined that businesses that look to moving into the City will not look favorably at the City. A CAC member asked if Econsult looked at the retail market differently from the industrial type business. These were looked at separately. A CAC member asked if CAC could see the complete report. PWD stated that the report available would be made available to the CAC. A CAC member asked if Econsult would review the rate case results and analyze the impact. It was noted that the rate case is not scheduled to begin until early in the new year. A CAC member pointed out that the last CAC pronouncements had essentially been implemented; but it appeared to him that this CAC’s recommendations may not be implemented. It was noted that the previous CAC process



was quite different from this process. Although it was confirmed that the CAC’s opinions will be documented in the report, the CAC outcomes will not be consensus recommendations as in the last report. Therefore the CAC opinions will be evaluated in context of feasibility, capability, and flexibility of implementation and then PWD will determine what can be implemented now, what has to be done later, what cannot be accomplished, etc. This information will be reported back to the CAC. The same CAC member stated that he would prefer to have consensus from this CAC and then develop the recommendations. Another CAC member countered that the CAC would not be able to reach consensus on all issues. It was explained that there will be a summary of issues discussed and suggestions provided. The final recommendations will be addressed by PWD during the rate process.

Incentives Incentives sheets were provided ahead of time as homework to review and for the CAC members to rank. The voting process was explained. To facilitate the discussion, CAC members were asked to give their overall rating of each incentive. The summary of these overall assessments is shown in the table below. CAC members were then asked to provide additional commentary on the incentives. Commentary and questions follow the table. Table 1: Incentives Options Overall Assessment Rating

# H M L Current:

1 Green Roof Tax Credit 3 1 12 2 Decreased Stormwater Plan Review Standards 2 5 8 3 Fast Track Development Project Review 1 0 13 4 Free Assistance Program 6 1 9 5 Stormwater Management Incentive Programs 4 3 9

Planned:

6 Stormwater Retrofit Grant Program 6 4 3 7 Stormwater Pioneers Recognition Program 1 6 8

Other*:

8 Floor Area Ratio/Density Bonus 2 2 1 9 Reduction in Mandated Parking 0 4 1

10 Transferable Development Rights 7 6 0 11 Multi‐year Property Tax Credit 5 5 0 12 Rebate Program 0 9 4

*Note that for Other incentives, members for whom the incentives did not apply did not vote.

Comments, Ideas, and Assessment: Existing and Planned Incentives Green Roof Tax Credit: H – 3; M – 1; L ‐12

Low: Most of the roofs in Philly cannot take a green roof; maintenance adds cost especially when it doesn’t rain; too expensive; retrofitting is difficult; works better as a front end design. To make it Attractive: Credits available only for new construction; provide info on resources that owners can leverage; provide a list of preferred partners and technical assistance; PWD needs to market more effectively (although a Revenue Department program). High: We need everything available in the tool box so that if it doesn’t work for one, it may work for someone else; will work together with other incentives.

Reduced SW Standards: H – 2; M – 5; L ‐ 8



Low: A reduction in water quality standard (1 inch capture) would make this more attractive. To make it Attractive: None High: None

Fast Track Project Review: H – 1; M – 0; L ‐ 13

Low: Doesn’t make much of a difference; it is irrelevant to the critical path as L&I review can require at least 2 months. To make it Attractive: Fast track all approvals and not just the stormwater review and approval. High: None

Other: One member noted that stormwater plan review was very onerous for his project. Free Assistance Program: H – 6; M – 1; L ‐ 9

Low: Ultimate cost of installing retrofits negates the assistance provided. To make it Attractive: High: Without this aid, property owners won’t be able to afford to even look at retrofits; program is popular. Other: Staff noted that many retrofit plans are coming in to PWD for review. A CAC member asked the cost of the retrofit that was constructed as a result of the Assistance Program. Other members noted that the cost varies widely but one of the member’s retrofit cost $250K.

Stormwater Assistance Phase‐In Program (SWAPP): H – 4; M – 3; L – 9

Low: The program is not large enough to address the needs of very large properties. Other: It was noted by several members that the City has 21st century minimum wage requirements that need to be adhered to if the developer gets some incentives from Philadelphia; that requirement has now been extended to tenants of those properties. PWD should determine whether this applies to the SWAP program. PWD will need to be aware that this provision will discourage utilizing such funding assistance.

Retrofits Grant: H – 6; M – 4; L ‐ 3

Low: Who pays for the free money is an issue; program that benefits one class of rate payers is subsidized by all rate payers; view that incentives or credits for residential and hence they shouldn’t be burdened with these grant costs. Other: A CAC member asked when the program would be fleshed out and staff answered that it would be around November.

Pioneers Recognition: H – 1; M – 6; L – 8

Low: It is typical marketing and nothing special about this. High: It is positive marketing and doesn’t cost the property owner at all and costs PWD little; although some think it does not mean much, it is another tool in the toolbox to assist property owner.

Comments, Ideas, and Assessment: Other Incentives Floor Area Ratio/Density Bonus: H – 2; M – 2; L – 1

Low: This applies only to new development; can be in conflict in City’s zoning requirements; PWD does not have control over this; is at odds with open space preservation.

Reduction in Mandated Parking: H – 0; M – 4; L – 1 No comments.



Transfer of Development Rights: H – 7; M – 6; L – 0 Low: Administration is difficult and there are legal risks. High: Helps that one parcel can do huge retention where feasible and cost effective when for another parcel it is not feasible.

Multi‐year Property Tax Credit: H – 5; M – 5; L – 0

Low: Nothing special about this – won’t property tax values go down anyway? High: Another good tool. Other: It was noted that retrofits may already qualify as improvements under the City’s current 10‐year tax abatement program for improvements. This should be verified.

Rebate Program: H – 0; M – 9; L – 4

Low: Limited applicability. Other: It was noted that rebates, as opposed to grants, decrease PWD’s risk of funding retrofits that are then not installed.

A CAC member indicated it would help to know the relative stormwater benefit of the various incentive programs. A CAC member explained his cynicism on the concept of incentives: If the purpose of these incentives is to really help the 120 most impacted properties, then incentives would make sense. Incentives are not meaningful if they are geared towards parcels that have an average increase in fee of $976 per year. It was noted that frequently, because the most impacted parcels have large land area and/or impervious area, they place the most demand upon the stormwater program. Retrofits on these properties can make a big difference. Thus, incentives are perfectly suited to these major ratepayers. PWD staff noted that the Department wants to encourage green acres; but ultimately is looking to grab the one inch as it is cost effective and feasible. Additionally, not all of the most impacted parcels are in CSO areas, where PWD is mandated by both state and federal permit requirements as well as City initiatives to create or encourage green acres.


Date Topic


October 13 Credits 2 –Other Credits



First Name Last Name Affiliation Robert Ballenger Community Legal Services



Jack Bonner Resident



Jay Butler Thackray Crane / UBOAP (Alternate for Wesley Firkin)

Michael Carter Manko Gold Katcher & Fox

Bryan Collins Penn Future (Alternate for Brian Glass)




Donald Haas Brandywine Realty Trust

Nick Iervolino Chapman Ford (Alternate for Michael Chapman)


Sheilah Louis Philadelphia City Council – Legal




Joe Pyle Scattergood Foundation Harvey Rice City of Philadelphia – Controller’s Office


Other Attendees

First Name Last Name Affiliation Glen Abrams Philadelphia Water Department Peter Angelides Econsult Corporation Joe Clare Philadelphia Water Department Paula Connelly Philadelphia Water Department Chris Crockett Philadelphia Water Department Joanne Dahme Philadelphia Water Department Andre Dasent Philadelphia Water Department Steve Furtek Philadelphia Water Department Prabha Kumar Black and Veatch Anna Lepchuk Philadelphia Water Department Amanda Lieberman Simon Public Relations Henrietta Locklear AMEC Earth and Environmental Deb McCarty Philadelphia Water Department Daniel Miles Econsult Corporation Howard Neukrug Philadelphia Water Department Patrick Perhosky Philadelphia Water Department

Andy Reese AMEC


Lisa Simon Simon Public Relations



CAC Meeting #8

Summary

September 22, 2011

Stormwater Utility and Rate Consultation – Credits Analysis and Recommendations Study

September 22, 2011 PWD CAC Mtg 8 22SEP11 V3 1

Citizen Advisory Committee Meeting #8 Meeting Summary September 22nd, 2011 6:00-8:30pm; Courtyard Marriott - Philadelphia Downtown – Juniper Room

21 North Juniper Street Philadelphia, PA

The eighth meeting of the Philadelphia Water Department’s Stormwater Citizen Advisory Committee (CAC)

commenced at 6:30pm with a brief recap of the previous CAC Meeting.

Review

The meeting began with a review of the CAC charge. PWD is looking to the CAC to provide its views on the current

program and provide advisory opinions for consideration as part of the next rate case. This was followed by a

recap of the incentives discussion held during Meeting 7. A summary of the results of both the discussion and the

incentives scoring work sheets was provided and presented in the table below.

Table 1: Incentives Options Overall Assessment Rating

Status Type H M L SCORE

Other Transferable Development Rights 7 6 0 27

Other Multi-year Property Tax Credit 5 5 0 20

Planned Stormwater Retrofit Grant Program 6 4 3 19

Current Free Assistance Program 6 1 9 10

Other Floor Area Ratio/Density Bonus 2 2 1 7

Current Stormwater Mgmt Incentive Programs 4 3 9 6

Other Rebate Program 0 9 4 5

Current Decreased Stormwater Plan Review Stnds. 2 5 8 3

Other Reduction in Mandated Parking 0 4 1 3

Planned Stormwater Pioneers Recognition Program 1 6 8 1

Current Green Roof Tax Credit 3 1 12 -2

Current Fast Track Development Project Review 1 0 13 -10

The consultant team applied a scoring system to show general agreement and it was noted that the top two

programs most favored by the CAC appear to align well with how a developer might rank incentives based upon

which has the best potential to impact project costs. The fundamental difference between “incentives” and

“credits” was revisited and the overview provided a transition to the topic for Meeting 8 - Credits. Incentives are

one-time, targeted assistance such as rebates/cost sharing, discounts, special recognition, that serve as an

impetus to initiate some onsite stormwater management measures to enable volume control, quality

enhancement, etc. Credits are an ongoing reduction in a property’s calculated stormwater fee, which are earned

by the following actions:

• On-going activities on the property that reduce demand on the stormwater system;

• On-going activities on the property that reduce the utility’s cost of service.

CAC Meeting #8

Summary

September 22, 2011



Credits Background

As detailed in previous handouts 2, 3, 13 and 14 and further discussed in Handout 15, an overview of the current

credits program was provided to the CAC along with national examples of credits which are utilized in other

municipalities. The typical basic guiding principle in developing and granting stormwater credits based on impact

and cost reduction can be stated as:

Credit should be given for approved private investments or actions commensurate with

reduced public cost, or which produce a stormwater-related public good that is ongoing.

Credits normally have little to moderate impact on a stormwater utility’s overall revenue generation. This is

largely due to the fact that, even with a well designed credit program, it is often difficult for properties to obtain

significant credits. The difficulty in obtaining credits are often due to factors including limits that a utility sets on

the portion of the fee which is creditable and/or due to the difficulty in meeting the stringent technical

requirements stipulated for obtaining credits. However, credits do offer an incentive to property owners to do

something “credit worthy” on their properties thereby reducing their stormwater fees.

The downsides associated with credits were discussed, namely:

• A credits program can be difficult to administer and the cost of administration may not be fully offset by

reduction in demand on the system or reduced costs to the utility. For example, a residential rain barrel

credit program, while simple for a property owner to implement, may result with an increased demand on

utility staff to administer and therefore may not be a viable option for credits.

• The credit or associated stormwater fee itself may not be large enough to change behavior but as fees go

up over time it can become more attractive to a property owner.

• Credits might be considered mismatched during the development phase as the property owners get credit

and not the developer. The developer does not have incentive to build something credit worthy unless

mandated by stormwater management requirements.

• When a credit program is implemented, there is not always an immediate capital program cost reduction

to the utility; over the long term, when a number of properties implement onsite management that would

contribute to lowering future utility costs.

A member of the CAC asked why focus on credits from a cost perspective if it doesn’t reduce costs immediately. It

was noted that the short term costs are not immediately reduced but costs are generally reduced over the long

term and the environmental benefits are immediate. Credit programs may also assist utilities in meeting their

Clean Water Act requirements in a more timely manner and help complement the utility’s Long Term Control Plan

initiatives.

We then discussed the two reasons credits are given:

1) Reduced impact from a site – Property owners are being billed based on GA/IA which serves as a

surrogate measure of the runoff characteristics of their site. Properties which have done something to

“appear less impervious” to the system by either greening or constructing a Stormwater Management

Practice (SMP) receive credit based on the area changed and/or managed. While this is not necessarily

exclusively engineering based it does serve as the needed “rational nexus,” which recognizes good science

and good practices owners undertake on their sites.

2) Reduce Utility costs through private efforts - such as

a. Education – PWD’s water quality permit requirements mandate the education of citizens on water

quality. Such education program could be covered by teachers at local schools, thereby

effectively taking the burden away from the Water Department.

CAC Meeting #8

Summary

September 22, 2011



b. Maintenance – Owners that undertake maintenance on their properties that the Department

would otherwise have to pay for could be eligible for credit for reducing PWD’s maintenance

costs.

A member of the CAC asked why the credit could not directly reflect the actual savings to PWD e.g., subtract out

the cost if a property owner pays to green an acre rather than the City paying for it.

Another CAC member asked what percentages of revenue was available for crediting. It was noted that an

estimate of 100% of the GA/IA revenue was used to account for credits during the previous rate case. (Note:

Properties that receive credits still need to pay the monthly minimum charge, if the calculated charge after the

application of credits goes below the minimum charge). Currently, while some receive credits, eventually non-

credited properties would all end up paying more. Few properties currently receive credit for built retrofits

(applications are required) but PWD anticipated many additional properties would apply for credit over time. It

was noted that while credits for SMPs are ongoing, it does require a onetime capital investment from a property

owner. A member of the CAC felt that owners should get credit for changes they make on their properties, not

necessarily the existing characteristics of their property.

PWD noted that they must balance the need to carry out planned infrastructure improvements while encouraging

private property owners to green their properties. As PWD reaches milestones within its Long Term Control Plan

(LTCP) known as Green City, Clean Waters PWD will try to tie these green infrastructure savings into their future

LTCP implementation costs.

A member of the CAC, who has been considering putting in a detention basin, said that he was willing to invest

money to do so and had already spent money exploring design options. He wanted to know if he would still be

able to receive 100% credit 10-years from now. He noted he needed to amortize costs over a long period of time

and needed to know if PWD would be reducing the available credit from 100% to 50%. It was noted that the CAC

would discuss the portion of the fee available for crediting later on in the meeting and would further discuss

grandfathering at the next meeting. The CAC member added that his project would benefit his property as well as

many others impacted by flooding. PWD had agreed to his proposal in principle and that other agencies such as

the Army Corp of Engineers and the Pennsylvania Department of Environmental Protection (PADEP) have not

approved it for various reasons.

Current Credits System

The CAC was then provided with an overview of the current credit system. It was noted that the CAC had

previously discussed the GA credit extensively during Meeting 6. The CAC’s input was currently being reviewed

and will be compiled as a component of the CAC Final Report. The existing IA credits were then discussed and it

was pointed out that several of the IA credits such as the disconnection credit could be considered “modified IA”

credits as they require a property owner to apply for credit and may require a field visit from PWD staff for

confirmation. A member of the CAC asked if the credit was retroactive as a property owner could argue that their

sites weren’t being charged correctly. PWD noted that it had done retroactive crediting for the first year allowing

a grace period for property owners to apply, PWD mailed a “fact sheet” reflecting property specific SWMS charges

to all the non-residential properties in February 2010 (five months before launching the parcel area based

charge), conducted “open houses”, and started accepting Credit applications nearly five months before the charge

went into effect. A disconnection credit can’t be given automatically as disconnection is site specific and not

visible via PWD’s current data and aerial photography.

CAC Meeting #8

Summary

September 22, 2011



The IA Credits that require retrofits/redevelopment were reviewed and it was noted that the available credit is

currently 100% which is larger than many other utilities currently allow.

The NPDES permit credit was discussed and a member of the CAC asked how the current NPDES Permit Credit was

determined. PWD’s rate consultant noted that it was a recommendation of the original CAC and that it had

largely been tied to compliance costs at that time, which would be quite different based on today’s permit

requirements.

Current Credits Stats

An overview of the properties currently receiving credit, after one-year of implementation, was presented and is

summarized in the table below.

Credit Type Number $$ at full GA/IA Charge

GA 303 $ 1,946,039

IA* 37 $ 1,347,054

NPDES 22 $ 5,312

TOTALS 362 $ 3,298,405

*IA does not include direct dischargers or impervious area

disconnections which currently total $3,104,488 annually

A member of the CAC asked how many of the properties receiving credit had actually built something. The thirty-

seven (37) properties listed as receiving credit excludes both disconnection credits and direct dischargers. These

37 properties are receiving credit for 100% of the IA area managed by their built SMPs. Another member of the

CAC inquired if there were any trends in the types of business receiving credit. Currently, they are no definitive

trends and a range of properties including small condos and large industrial facilities are receiving credits. It was

noted that PWD felt there was currently a backlog of eligible projects that hadn’t applied for credit yet but had

been approved via PWD’s plan review process and may be constructed or were currently under construction.

Credit Change Discussion

In Handout 15, the CAC was posed two questions regarding changes to the credit system. The results of these

discussions are summarized in the following sections.

Question #1 – What suggestions do you have to improve and change the current credit program to make it

more effective?

Design Requirements and Credits - It was noted that Credits are often tied to design requirements. The general

thought in this approach is that if you meet the design standard you receive credit. Many Cities use this approach

while others do not. The developer needs to know going in – “if I meet this standard then I can get this credit”

(although the credit will be passed along to the future property owner) and that during this phase of a project a

developer really needs to know what it will cost. The current credit system is well aligned with the current water

quality requirements but doesn’t necessarily recognize peak flow control for larger storm events provided by

CAC Meeting #8

Summary

September 22, 2011



some of the hundreds of basins constructed throughout the City prior to the stormwater management standards

adopted in 2006. PWD is currently considering criteria to recognize these properties, and whether they should be

eligible for credit. PWD would like the CAC’s input on peak flow reduction credit.

Other Cities – In Handout 15A the CAC was provided with examples of other credit scenarios utilized in the 24

cities described in Handout 15A. The CAC was alerted to the fact that credits can vary significantly and while

there may seemingly be no consistency, credit programs are tied closely to both a utility’s ’s regulatory and

financial needs.

A member of the CAC felt this made sense as every City is unique with respect to their utility and tax structures.

Another member of the CAC noted that Cincinnati’s stormwater rate was “1/8th of Philadelphia’s and that he

really needed to know how much a sample City was charging for stormwater and how that charge relates to their

credit system in order to provide input. The CAC member was asked to provide his ideas on a general basis and

that PWD would be evaluating which credit recommendations would make a good fit to the current fee structure.

Retrofit vs. Redevelopment/Development - PWD noted that the current stormwater management guidance is

primarily tailored for redevelopment or new construction projects. During the review process, PWD typically

defaults to the current Stormwater Guidance Manual. In working with customers who are interested in

retrofitting, PWD recognizes this sometimes places design constraints on projects, making it difficult for

customers to meet the credit criteria. PWD has needed to exercise engineering judgment that makes sense for

retrofits and is currently considering the creation of a separate standard/guidance document to specifically

address retrofits.

A member of the CAC expressed his concerns over potential changes and how long a new credit system might last.

It was noted that this is an ongoing concern for PWD as well since its program requirements continue to evolve

over time.

Following this primer discussion, the CAC was asked to go around the table and provide their own ideas and

feedback on the following:

• Do you have any experience or concerns with the current crediting system?

• Is there something you’ve read or seen that might be good to offer as a potential credit formula?

In addition, they were asked if PWD should consider the following:

1) Peak flow Credits

2) Education Credits

3) Changes to the criteria for retrofit versus new construction

A summary of the CAC’s ideas and feedback are provided in the table below:

Name Affiliation


Supported 1) Peak Flow and 2) Educational Credits.

Recommended clear, written standards that aren’t

discretionary during the improvement process (e.g.

pervious pavers – gallons/area) and providing a

“laundry list” of approved SMPs.

David Wolf Wolf Investment Corporation /

UBOAP

UBOAP wants to be “grandfathered in. “

Difficult to retrofit. Needs a guarantee and a

“concrete contract” that credits will be for good

forever. Spent $1M to engineer and retrofit several

CAC Meeting #8

Summary

September 22, 2011



Name Affiliation

properties. Looks at what long term costs will be and

how to mitigate. Willing to do good things to his

properties.

Patrick Gregory McNees, Wallace & Nurick If a practice is creditable - allow credits to go below

minimum amount. Don’t single out education.


Supports Peak Flow Credit as it benefits the public

Change criteria for retrofits but make it effective –

don’t allow for full credit if the requirements can’t be

met. Concerned new credits may only target certain

properties.


Supports Peak Flow and Education Credits as

long as they are tied to actual savings for PWD

and tied to program needs. Would prefer offsite

mitigation to lowering standards on individual

properties. Allow for banking or trading.


Support Peak Flow Credit. Educational

institutions have their own curriculum

requirements which might make credit difficult.

If property can achieve multiple/abundance of

credits - support sale of credits

Richard McClure Kennedy Wilson Properties Support Peak Flow and providing better written

standards and “laundry list.”


Focus on Fairness and wants to make the credit

process simple and obtainable. If standards

can’t be meet – offer an agreed upon reduction

e.g. reward for a 50% if achieved. Support

Education over the long-term.


Supports Peak Flow Credit. Disagreed with

Education Credit. Acknowledge differences

between retrofits versus new construction.


Support Peak Flow Credit – surprised original

CAC didn’t recommend this credit.

Education –not viewed as a benefit.


Support Peak Flow Credit but owners must

perform maintenance in order to receive credits

- currently holds a state stormwater permit

which is self reporting. Education – Could

recognize organizations other than schools (e.g.

Boy Scouts). Special consideration for retrofit –

retrofitting on an older property is difficult.

Robert Ballenger Community Legal Services

Recognize benefits of Peak flow reduction.

Skeptical of Education but open to it. Consider a

partial credit for partial reductions from retrofit

projects.


Generally supports Peak Flow Credit but needs

to understand the modeling/supporting facts.

Disagree with Education Credit as it is a cost

CAC Meeting #8

Summary

September 22, 2011



Name Affiliation

now. Supports recognizing retrofits separately.


Ultimately wants a formula that applies to any

Philadelphia property- residential and non-residential

- that can calculate the rate of property based upon

its actual costs. Supports Peak Flow, Education and

any credit that reduces costs to the water

department with a direct correlation of cost. Don’t

change criteria for retrofit as other incentives may be

offered.

During the discussion, a member of the CAC pointed out that some members may not realize that they can do

partial retrofits and receive credit for the area they are treating. Another member asked if it would be possible to

sell credits as some properties may be able to achieve an over abundance of credits while others cannot. Another

member of the CAC noted that location may have an impact on credits as new development may have a greater

impact on the City in areas where infrastructure does not exist than development in areas which already has the

infrastructure in place to handle it.

Following the round table discussion, the CAC asked for additional details on the potential Peak Flow credit and

how it might be accommodated in the credit structure. This would help address issues surrounding direct

dischargers and may allow legacy detention ponds to get credit.

A member of the CAC inquired if there is an area where there is no flooding – why should they receive credit

noting that location is an issue in any decision that someone makes in relation to real estate.

The CAC was then asked to weigh in on changes to the credit program options and what PWD should pursue

further. The results were as follows:

1) Peak Flow Credit – All CAC members generally support

2) Education Credit - 3 - Strongly Support, 9 - Middle Ground/Medium Support, 1 - Other/No support

3) Address Retrofits– All CAC members generally support

Question #2 – How much of the user fee should PWD make available for credits?

The CAC then discussed how much of the fee should be made available for credits.

Credit Generosity – It was noted that under PWD’s current crediting system 100% of the IA/GA fee is available for

credits. As discussed in the handout, this approach fully matches the premise used for justification of the user

fee: impervious and gross area as a surrogate measure for demand placed on the system. Under this philosophy

100% of the GA/IA charge would be available for crediting if the property fully met the required standards for the

key impacts: peak flow and water quality/volume. This approach maximizes the return on investment and affords

incentives for key practices which meet long term goals of the City.

Why Cap Credits? - Reasons for potentially capping credits were discussed. The following thoughts were noted

regarding PWD’s costs:

• Billing and collection costs are fixed

• Unrelated Fixed Costs for program costs (such as education, monitoring, research and design, and

reporting) are not directly attributable to flood control or water quality impacts

CAC Meeting #8

Summary

September 22, 2011



• Roads account for approximately 30% of the impervious area in the City and the actual costs of the

roadway impervious area impact is being borne by all ratepayers generally in proportion to their site.

• Sites which receive 100% credit still get benefits from city wide management for which everyone else is

paying. The question was posed if this was fair to other rate payers – recognizing that simply meeting the

standards does not actually mitigate all the impacts of development.

The CAC was asked to consider if these costs should be included in the fee available for credits.

Why not to Cap Credits? – The CAC was then presented with several potential reasons/thoughts on why capping

credits might not be necessary. The following reasons were noted for discussion:

• There may be an 18% reallocation following the next rate case which will shift costs onto the water/sewer

portion of the bill. Therefore this cost would not be available for crediting.

• There is currently a minimum fee of approximately $13 per month

• The current system already allows for 100% credit of the IA/GA fee and why would we go backwards?

• The technical requirements (and the associated capital investments) needed to meet design standards

limit the number of properties eligible for credit

The CAC was then asked to provide feedback on the following questions:

1. What level of available credit could you support?

2. When you think about capping the current credit, where should the cap be?

A summary of the CAC’s thoughts and feedback are provided in the table below:

Name Affiliation


Allow for unlimited credits provided there is a direct

correlation of the activity and reduction of water

department costs – allow for the maximum credit

under this structure.


Credits should be tied to long term costs. Need 100%

credits and no cap if you want to continue to pursue

programs and incentivize retrofits in the future.


Lean toward a cap of some variety. Retrofit

promotes sense of equity but why should a retrofit

which achieves credit not share in costs. Streets issue

is a big driver – don’t push costs onto others.

Paul Bonasch Perfecseal Philadelphia Keep 100% Credit


Keep 100% Credit but link credit to PWD’s costs.

Make credits relative to the cost reductions to PWD.

If there are no impacts on PWD’s cost then do not

award credit

Bob Martin Brandywine Realty Trust Allow for 100% credit but only if it results in savings

to PWD


Don’t cap credits. If a property owner can reduce

beyond 100% and it’s economically feasible, pay

them for the percent beyond 100%. There will be

fewer participants as you get beyond 100%.

Richard McClure Kennedy Wilson Properties Allow for 100% and more if achievable.

Arthur Friedman Archdiocese of Philadelphia In order to maximize incentives, allow for 100% but

CAC Meeting #8

Summary

September 22, 2011



Name Affiliation

tie to cost savings. Allow properties to go beyond

100%.


Credits need to be a 1:1 credit for cost reduction.

Don’t enact a cap if the minimum charge covers the

water department’s costs assuming everyone

achieves 100% credit.

Maia Jachimowicz City of Philadelphia – Finance Prefer a 50% cap but recognizes reality of changing

the current system from 100%.

Patrick Gregory McNees, Wallace & Nurick Correlation of credit and reduction of PWD’s costs.

David Wolf Wolf Investment Corporation /

UBOAP

40% of city is not paying their full share. Those with

dual pipes don’t impact CSO at all. Get very little in

return for paying the full fee from these properties.

If property owners invest money they should get

100% credit if the standards are met. Recognize

expense to the property owner.


If 50% of costs are going to be there regardless of

retrofits it’s hard to justify 100% credit. 100%

incentivizes people to do things but if PWD’s costs

don’t get offset, it creates big problems

The CAC was then asked to weigh-in along the “thoughts-o-meter” in terms of what level of crediting they could

generally support. While two members of the CAC felt that current GA/IA credit system should be left at 100%,

the majority of the CAC felt that credits and actual savings should be correlated as much as possible. The CAC

generally agreed that this supports the level of fairness associated with the crediting system. Under this

approach, 100% of the actual costs savings realized by PWD should be creditable to the property owner.

Parking Lot

The following questions were raised. As part of the CAC Meeting process, these questions will be answered and

addressed either as part of the next CAC Meeting if time permits or under separate cover.

Parking Lot

Federal and State Permit Requirements

Retroactive Credits

Remaining Meeting Topics and Schedule

The remaining CAC meetings and the Topics are follows:

Date Topic

October 13 Credits Part 2


The CAC was asked if the final meeting, currently schedule for November 3rd, could be moved to a later date to

allow for additional preparation time of the draft final CAC report. November 17th was suggested as a potential

CAC Meeting #8

Summary

September 22, 2011



meeting date and PWD agreed to email or discuss with members potential dates for the final meeting to

determine a time when the majority of the committee can attend.

CAC Meeting #8

Summary

September 22, 2011









Michael Chapman Chapman Auto Group











Harvey Rice City of Philadelphia – Controller’s Office


Other Attendees


Jeff Allen United Business Owners Association of Philadelphia

Ade Bakare McNees, Wallace & Nurick

Joe Clare Philadelphia Water Department

Paula Connelly Philadelphia Water Department




Steve Furtek Philadelphia Water Department






Patrick Perhosky Philadelphia Water Department

Sarah Pierro Philadelphia Water Department



Lisa Simon Simon Public Relations

CAC Meeting #8

Summary

September 22, 2011



Other Attendees

Teresa Schmittberger McNees, Wallace & Nurick

Jim Smullen CDM



CAC Meeting #9 Summary October 13, 2011

Stormwater Utility and Rate Consultation – Credits Analysis and Recommendations Study October 13, 2011 PWD CAC Mtg 9 18OCT11 V5.docx 1

Citizen Advisory Committee Meeting #9 Meeting Summary October 13th, 2011 6:00‐8:30pm; Courtyard Marriott ‐ Philadelphia Downtown – Salons I & II 21 North Juniper Street Philadelphia, PA

The ninth meeting of the Philadelphia Water Department’s Stormwater Citizen Advisory Committee (CAC) commenced at 6:30pm with a brief discussion of the final CAC Meeting date and CAC report.

Final CAC Meeting The meeting began with a poll of the CAC members to determine the final meeting date. The project team had requested the final meeting be moved in order to allow for additional time in order to prepare the final report and allow the CAC an opportunity to review it prior to the final meeting. The CAC members voted and selected the November 14th as the final meeting date. The project team will aim to have the initial draft of the report to the CAC a week prior to the meeting. It is anticipated that the CAC will be allowed to comment on the draft report and their comments will either be addressed and incorporated into the report or included as part of an appendix detailing the written comments received. A CAC member inquired about what would be included in the report and how the information will be presented. Unlike the previous CAC, which focused on building consensus, the current CAC is advisory and does not need to reach consensus on all topics. If the CAC expressed general support for ways to address a particular issue, it will be noted. However, the report is intended to be an accurate representation of the range of views and opinions provided by the CAC on the topics that were discussed throughout the series of meeting.

Review The charge to the CAC was briefly revisited ‐ PWD is looking to the CAC to provide its views on the current program and provide advisory opinions for consideration as part of the next rate case. This was followed by a recap of the credits discussion held during Meeting 8. Based upon the CAC’s feedback from the previous meeting, members generally support the following:

1. Creating a peak flow credit 2. Modifying stormwater management requirements to recognize retrofits 3. Maintaining the IA/GA fee available for credit at 100% and not instituting a cap on credit provided that

any credit granted to a property owner is reasonably aligned with PWD’s estimated cost savings In conjunction with item 3 above, during the previous meeting a member of the CAC recommended that credits be aligned with costs savings and asked for additional information on the estimated costs savings if a private land owner were to green an acre. Based upon PWD’s estimates it will cost the Department approximately $7,000/year/green acre, thus a credit of $4,000/year (assuming the first inch of runoff from a full acre of impervious is managed) is feasible. Based upon this, PWD Staff felt they could generally support continuing to allow for 100% IA credit. A member of the CAC asked if the credit would be “forever” and it was pointed out that a portion of tonight’s discussion would focus on grandfathering.



Trading and Banking Background As detailed in handout 15, the three general options that might be proposed for a trading or banking system were discussed namely:

• Option 1 – Individual Private Transactions • Option 2 – Private Banking • Option 3 – Fee‐ in‐Lieu

The four main parties that would potentially be involved in these systems are as follows:

1. Client – the property owner needing or wanting to meet volume requirements in one or more parcels 2. Bank Sponsor – an entity responsible for offering credits trading 3. Long‐term Owner – the entity that holds fee title to the site where the offset is built or provided 4. PWD aka “the Permitting Agency” – entity through which development/stormwater management is

permitted (PWD in this case) Trading and banking have been utilized for wetlands mitigation, phosphorus and other nutrient trading, and stream restoration. Some banking options work but they are complicated and challenging to implement. However, it was noted that these general trading and banking approaches have not been applied to stormwater credit trading as it relates to fees. Therefore, the project team had developed a rough framework and the CAC was presented with the way in which these options would generally work and how (if applicable) each party would be involved in the process. It was noted that Washington, D.C. was currently developing a credit trading program which would use a market‐based system to address stormwater retention requirements but had not been implemented yet. Creating a banking or trading system will require that a number of issues be resolved. Some of which include:

• Location options for the compensating volume • Equivalency ratios • Financial assurances • Transfer of liability • Long‐term viability of the alternate site • State and Federal oversight or approval • Availability of sites

• Credit amount and recipient • Forms of agreement • Role of technical team • Loss of sites through trading – i.e. one traded

site takes two sites • Cost and complexity of transaction • Time delay in volume provision

While it was not expected that the CAC would be able to resolve these issues, the complexity of the potential problems were discussed. PWD considers all of the options to be potentially viable. Therefore, with the understanding that there is limiting funding available to establish these programs in the short term, the CAC was asked to provide input on which type of program PWD should concentrate its initial efforts. The CAC discussed the ways in which the options might work. The CAC acknowledged the complexity of the various approaches. From the discussion, it was noted that for any system to work, it is important for the property owner that is seeking the credit to receive the credit in some way and be able to maintain it in the long‐term. Some members of the CAC expressed interest in being able to pay down costs via a one‐time fee rather than through ongoing operational costs. It was suggested that PWD could create a suite of projects that could be funded via public/private financing based upon cost per unit volume as a way to offer credit to some property owners who cannot retrofit on their sites. The CAC discussed that ongoing payments for operation and maintenance might be necessary in order for a fee‐in‐lieu system as the costs for PWD might not be completely deferred. For any approach, the maintenance costs



would likely need to be balanced with the credit and fees paid by the property owner. In the long‐term, the costs of maintenance have the potential to “eat‐up” the credit if the fees weren’t sufficiently high to warrant the investment. A CAC member pointed out that retrofits are easier to do in the separate sewer areas and more difficult in the CSO areas. One question that would need to be addressed is whether or not credit could be traded between these areas or between different watersheds, which PWD currently does not allow. A member of the CAC noted PWD’s American Street project, which would be a potential candidate. The project would involve construction of SMPs within the street right‐of‐way capable of treating runoff from the surrounding properties. In this case, he felt that it made sense for these properties to “buy‐in” and receive credit for helping to fund the construction of SMPs which manage the runoff from their properties. He suggested that they might also pay an ongoing fee to help with maintenance. This approach seemed well aligned with the LTCP and allows properties owners to pay into a system which helps them as well. Several members discussed ways in which private companies could potentially profit and one member felt they should be able to sell credit in order for a banking system to work.

Variable Credit The CAC was also presented with the idea for allowing for a “Variable IA” credit. This would mean a property owner could build a retrofit SMP to manage, for example, 0.5‐inch of runoff rather than an inch. It was noted that over time, if a site is capturing the first inch of runoff, there are many rainfall events that occur throughout the year that will not use this capacity – essentially leaving “air” in the system. A member of the CAC noted that based on the information they reviewed, there are only seven 1‐inch rainfalls a year in Philadelphia. Washington, D.C. is looking to apply the variable credit approach in their separate sewer areas. This approach is potentially complicated in CSO areas where the general focus is on minimizing overflow events. From PWD’s perspective, if a property owner oversizes a stormwater management system, the additional capacity should be utilized to capture volume from other properties and not build a system which captures volume from less frequent storm events. However, capturing less than the one‐inch could also be useful. Simply crediting for a lower volume capture from the same drainage area is not as effective for PWD. A CAC member felt this was a potential argument for not requiring everyone to meet the one‐inch runoff requirement. It was noted that the Variable IA credit would be applied to retrofits and not for new and redevelopment which must meet the design requirements. However, it was noted that additional volume control could be beneficial and from a banking perspective would allow for smaller “banks” that would still be viable.

Trading and Banking Discussion The CAC was asked to think about what they would like to see and what they thought PWD should start with for implementation. Following the discussion of the general options, the CAC was asked to provide their input on the following questions:

• Other options or ideas? • Which of these options seems most attractive/which should PWD start with?

1. Individual private transactions abetted by PWD 2. Private Banking 3. Fee In lieu

Prior to the roundtable discussion a member of the CAC suggested that a fourth option be added which would support implementation of all options. He felt that all of these methods would need to be made available to property owners. No.4 – “All of the above” was added to the list of potential options.



A summary of the CAC’s ideas and feedback are provided in the table below: Name Affiliation Trading and Baking Options


Supports 3. Payment in lieu – simple and fits what PWD wants to do – not reinventing the wheel – fits with LTCP. If private property owner, seems easy – no agreements with private entities, etc. Noted American Street project – where fee in lieu makes sense.


#4 ‐ Concerned about being locked in from the CAC process. #3 does seem clean but wants to build a long term viable system. #3 is easiest to do now– maybe private trading works in the future. Would like to see a pilot on #1 and #2 to see how they work.

Michael Carter Manko, Gold, Katcher& Fox

Liked 3 the best – transaction costs lower / fewer – not worried about private property owner maintaining it moving forward. Difficult to understand how private entities would reach agreement – worry about private compliance. Trading credits conceptual among private properties is tough.


Lean toward #3 as most immediately possible – would like to see other structures would look like if they were rolled out. Cistern Retrofit – is there a consequence for water not being on the meter for water from reuse? Water goes into the sanitary sewer potentially switching stormwater into sewage. How does that impact the sanitary charge?

Paul Bonasch Perfecseal Philadelphia More comfortable with #3 but need to define who maintain them and how it is paid for.

Jack Bonner Resident Provide funds for education”for capitialists” –allow businesses to figure it out.

Donald Haas Brandywine Realty Trust #3 seems to be the easiest but cynical – fees are like taxes – how to keep the $ from getting diverted over time. Allow private trades.


It’s easiest for PWD to do it but competition should play into this. If PWD does it, they will dictate costs ‐but if I go to another property owner they might charge me half of what PWD would. Private sector might do things more competitively than public sector.

Arthur Friedman Archdiocese of Philadelphia # 3 is the easiest but concerned with what happens when a property owner sells the property? Comfortable with #2 but guidelines and regulations are needed to make it effective.

Brian Glass PennFuture #1 – easiest to administer. Concerned with keeping within the watershed – structure a fee in lieu within the watershed and tie it within the impact.


Concerned with #3 as there are large upfront costs – may have to wait a while goes against wanting to do as much as soon as you can as soon as possible from a stormwater perspective. From the public versus private operation – think private would be cheaper. Concerned if there is a cost of losing sites forever with implication to PWD’s LTCP. From a business owner perspective they’ll be looking for the lowest cost.


In favor of # 3 based on long term viability of replacement sites. Have done wetland mitigation for third parties on sites previously. In short term PWD might have vested interest in



Name Affiliation Trading and Baking Options making sure they’re functional. Would there be an option to buy down stormwater costs? Better to tap capital money to pay down rather than paying an ongoing fee.

Patrick Gregory McNees, Wallace & Nurick Support Fee In Lieu. Unleashing capitalism is probably the best approach but if there are big regulatory hurdles it won’t work. #3 seems like it will work in the short term.


Option #3 might work for large institutional facility for universities. Doesn’t want to give money to the government. Option #3 is absurd. Option #2 – sounds like a copy of solar panels schemes and other government subsidies. Option #1 – is best, let business owners figure it out.


Start with #4 ‐ put everything together as we need all options to be successful. Deputy Mayor pointed out that it’s “More expensive to do things in Philadelphia than anywhere else.” Need a contract, binding agreement, easements, etc.


# 3 seems the easiest ‐ BMP related – recharge the groundwaterwhich is best done onsite. Liked #1 from perspective giving an individual the ability giving to balance amongst their properties / balance their portfolio. Liked # 4 if all the options are needed immediately.

Which of these options seems most attractive/which should PWD start with?

Option Description Results

1 Individual private transactions abetted by PWD 4

2 Private Banking 1

3 Fee In Lieu 7/2*

4 All options 2

*Two members of the CAC felt strongly when weighing‐in and stated that concentrating on the Fee In Lieu approach should not preclude other options.

In summary, while the CAC membership generally supported Option 3 – Fee In Lieu in the short term, many members felt strongly that all options should be eventually pursued. Grandfathering Discussion As presented in the corresponding meeting handout, Grandfathering is “to fully exempt from new credit regulations or to offer special considerations to someone already involved in an activity.” The discussion for the CAC members was centered on grandfathering for current credit holders and what happens to their credits under a revised credits regulation. The ways in which change can be handled span the horizon and three such possibilities were discussed.



• Immediate Change: The credit holder will immediately lose the credit on the GA/IA charges once a revised

credit program is adopted. • Slow Transition: The credit holder will slowly transition away from the credit under the same transition

plan used for phasing‐in and capping. • Grandfathered In–No Change: The credit holder will retain the existing level of credits forever, even

though the property is no longer eligible for the existing level of credits or for any credits at all under a revised credit program.

It was noted that changes currently being considered to credit regulation and policy might include adjustments to direct discharger policy, the addition of a peak flow credit and modification to the existing GA credit methodology. Of these, changes to the way in which direct discharges might be handled appear to be the most radical change that may result from the process. The CAC was presented with the following options on how changes might be addressed :

1. Cap annual change – similar to other capping methodology e.g. $100 and 10% increase 2. Grandfather until credit renewal – credits are renewed every 4 years –implement the change in credits at

the time of renewal – then properties would be eligible under the revised regulations 3. Grandfather those who made voluntary structural investment. This would enable the property owners

who did a retrofit a longer period of time to realize a return on their investment. The CAC was asked to keep in mind the impact to the rate payer on an annual basis. Beyond the individual rate payers’ costs, several additional factors for considerations were provided:

• Recognize past investment – CAC recommend this as an objective criteria • PWD recognizes property owners are impacted by policy changes and gradualism should be considered • Fairness – any credit that is granted is paid for by others and there are implication for other rate payers • How long should grandfathering last? • What is the impact of credit changes and number of impacted properties?

The CAC was posed the following questions: • Do you have other options or ideas? • Which of these options seems most attractive?

1. Grandfather forever 2. Grandfather till next renewal 3. Grandfather structural controls built for that purpose only



Before the discussion began a member of the CAC asked what the current credit holders expectation was when applying for credit for the first time – did they expect to receive credit for only four years or did they think the credit would last longer (e.g. forever). PWD advertised that credit were good for four years and would require renewal. The credits were to be renewed as long as the SMP is functional. The renewal process allows for verification of operation and maintenance as the SMP is under the property owners’ control. A member of the CAC inquired whether, if the economics changed, would they be renewed at a lesser rater e.g. implementation of stormwater management across the City results in reduced costs to PWD. He noted that with factors internal to his business as well as external to it will change often, resulting in elevated requirements. This has the significant potential to impact the return on investment (ROI) and associated payback period. He added that in the real estate community, properties are typically “grandfathered” under the code requirements at the time of construction. A bigger question is whether or not the rates would change, in which case the ROI can’t be predicted and property owners aren’t likely to invest without this assurance. He suggested locking in the investment including rates and credits at the time the SMP is built to effectively “lock in the ROI” or until such a time that the deed for the property changes hands. Several CAC members noted that it’s important that SMPs be maintained. Verification of conformance with operation and maintenance plans should be required for a property to be considered for both “grandfathering” and/or renewal. Another member added that these requirements had the potential to change over time as well. David Wolf wanted to go on record as a member of the United Business Owners Association of Philadelphia (UBOAP) and stated they felt that they have not been grandfathered as it applies to stormwater. He cited his own property which has both large taxes and stormwater fees associated with it, which has not been grandfathered in anyway. He felt that the rate payers most significantly affected haven’t been addressed and the CAC hasn’t discussed what PWD intends to do for those most impacted. He thought the CAC needed to hear what PWD’s intentions were for those rate payers, i.e. the 2,000 or so most impacted properties. He noted that the other counties surrounding Philadelphia don’t have a stormwater fee and that they are more competitive economically because of it. He added that if he received credit for altering his property he would likely need a permit and PWD would be aware of the change. David suggested that credit holders shouldn’t have to resubmit for renewal every 4 years and it was PWD’s responsibility to verify properties were in compliance. A member of the CAC felt that the grandfathering policy should align with the long‐term control plan – if the EPA requires the plan to be implemented over 25 years, credits should align accordingly. Additionally, he stated that he was currently considering raising rentals fees either 5% or 10% for the next year and noted the current and anticipated fees would require a 10% rent increase in order to cover his underlying costs. During the discussion, a member of the CAC asked if there was confusion amongst the group in regard to the scope of the grandfathering discussion. He felt that some members had a broader interpretation of the grandfathering discussion and that they were discussing grandfathering with regard to any future changes or adjustments in the stormwater fee and credits program not just those which might result based upon the opinions and feedback provided by the current CAC. It was noted that the grandfathering discussion is focused on changes to the current credit program and not future adjustments, though considering the impact of future program changes on future private investments is a concern of both the CAC and PWD. Additionally, some members of the CAC appeared to be considering an even broader interpretation and expressed opinions and views that related grandfathering to the current transition from equivalent meter based charges to the parcel based fee for highly impacted properties, i.e., keep these properties on a meter based



charge until they are redeveloped. While some members objected to the “givens” under which the CAC had been basing most of their discussions, it was noted that the current discussion was not focused on the transition to the parcel based fee; this was already addressed by the previous CAC and it was noted that the current CAC had already discussed extending the duration of the phase‐in and placing a cap on the annual incremental increases in fees to ease the transition for PWD’s most highly impacted customers. It was also noted that PWD intends to inform the CAC where they are with regard to phase‐in and caps in the final report and during the final meeting. Another CAC member felt she could not offer her opinion without having a better understanding of what the possible impacts were to both credit holders and all other rate payers as a result of changes to the credits program and would abstain from weighing‐in. A CAC member voiced a concern noting that the consensus seems to be that 100% credit would be important to maintain for people to invest in doing retrofits – changing this will result in less people investing and installing retrofit. Another member felt that the changes from capping the GA/IA credits from e.g. 100% to 90% would likely be minimal. A summary of the CAC’s “weigh‐in” is provided in the table below:

Grandfathering Summary Option Description Results*

1 Grandfather forever 9

2 Grandfather until next reapplication/renewal 1

3 Grandfather structural controls built for that purpose only (retrofits) 1

4 Grandfather for 25 years 4

*A member of the CAC abstained from “weighing‐in”.

In summary, while the “weigh‐in” results pointed more toward generally grandfathering for a significant amount of time, the discussion further revealed that most of the CAC felt it was important to recognize the investments made for structural controls both built during the development process and specifically for retrofits. Many noted that it was important that property owners be able to keep the credit as long as they maintained the SMP.


Date Topic





First Name Last Name Affiliation Robert Ballenger Community Legal Services













Sheilah M. Louis Esq. Philadelphia City Council – Legal





Other Attendees

First Name Last Name Affiliation Glen Abrams Philadelphia Water Department

Joe Clare Philadelphia Water Department










Patrick Perhosky Philadelphia Water Department






CAC Meeting #10 Summary November 14, 2011

Stormwater Utility and Rate Consultation – Credits Analysis and Recommendations Study November 14, 2011 PWD CAC Mtg 10 14OCT11 V4.docx 1

Citizen Advisory Committee Meeting #10 Citizen Advisory Committee Meeting #10 Meeting Summary Meeting Summary November 14th, 2011 6:00‐8:30pm; Courtyard Marriott ‐ Philadelphia Downtown – Juniper Room November 14th, 2011 6:00‐8:30pm; Courtyard Marriott ‐ Philadelphia Downtown – Juniper Room 21 North Juniper Street Philadelphia, PA 21 North Juniper Street Philadelphia, PA

The tenth and final meeting of the Philadelphia Water Department’s Stormwater Citizen Advisory Committee (CAC) commenced at 6:30pm with a thank you to the CAC Committee. The tenth and final meeting of the Philadelphia Water Department’s Stormwater Citizen Advisory Committee (CAC) commenced at 6:30pm with a thank you to the CAC Committee.

Thank you Thank you The meeting began with a thank you to the CAC committee members from Rina Cutler, the City of Philadelphia’s Deputy Mayor for Transportation and Utilities. Ms. Cutler thanked the committee members for their time and input throughout the CAC process. She noted that because of the nature of the process there are likely points that the CAC (both individual members and the overall committee) and the City may “agree to disagree on.” With the rate procedure still ahead and expected to extend throughout the next year, the final outcomes were not certain at this time. However, she expressed that the CAC input is extremely valuable and that the City hopes to reach, on principal, something equitable as a result of the CAC process.

The meeting began with a thank you to the CAC committee members from Rina Cutler, the City of Philadelphia’s Deputy Mayor for Transportation and Utilities. Ms. Cutler thanked the committee members for their time and input throughout the CAC process. She noted that because of the nature of the process there are likely points that the CAC (both individual members and the overall committee) and the City may “agree to disagree on.” With the rate procedure still ahead and expected to extend throughout the next year, the final outcomes were not certain at this time. However, she expressed that the CAC input is extremely valuable and that the City hopes to reach, on principal, something equitable as a result of the CAC process.

Overview of CAC Meetings Overview of CAC Meetings The charge to the CAC was briefly revisited one last time and an overview of the CAC meetings was provided. It was noted that the CAC had covered a great deal of information and PWD hoped that the CAC felt informed as a result. The major meeting topics and CAC opinions were briefly recapped as summarized in the figure below.

The charge to the CAC was briefly revisited one last time and an overview of the CAC meetings was provided. It was noted that the CAC had covered a great deal of information and PWD hoped that the CAC felt informed as a result. The major meeting topics and CAC opinions were briefly recapped as summarized in the figure below.

Figure 1 – CAC Meeting Overview Figure 1 – CAC Meeting Overview

Meeting #1 Kickoff, Background, and ObjectivesCharge to CAC: Provide advisory opinions to PWD Recognize past investments and allow for “grandfathering”

Meeting #2 Stormwater Programs and Costs Achieve fairness in the fee structure Tie revenues to actual costs/expenditures

Meeting #3 Cost Reallocation Reallocate appropriate stormwater costs from stormwater to wastewater based on science Strongly align program expenses with stormwater revenue requirements

Meeting #4 Extended Phase‐in and Caps Extend the fee phase‐in and offer a rate cap to most impacted

Meeting #5 Direct Dischargers Grant credit only to Schuylkill and Delaware Direct Dischargers All properties should manage water quality

Meeting #6 Gross Area Charge Account for existing conditions Reward good open space

Meeting #7 Incentives Change in stormwater costs will not likely affect business location decisions Offer incentives that make business sense and go beyond just stormwater benefits

Meeting #8 Credit Options and Credit Fee Eligibility Maintain available credit at 100% of the parcel area‐based fee Link credits as closely as possible to reductions in PWD costs

Meeting #9 Banking, Trading, and Grandfathering Investigate a banking program administered by PWD, but also look at other banking options Credit longevity should recognize customer's full investment



CAC Discussion The focus of the final meeting was largely to review the overall process and the draft of the final report and hear CAC opinions on the final report. A roundtable discussion was held and as conversation moved around the table, the CAC was asked to consider the following questions:

• In the final report, did we document your input fairly and effectively? If not, how specifically could we improve that aspect of the report?

• Out of all the issues/topics what is most important to you – a thought or concept – or – your top two issues/topics?

Additionally, the CAC was asked to chime in if another member expressed an opinion or an idea that they either agreed or disagreed with. The CAC discussion is summarized in the following tables.

Comments on the Draft Report

Name Affiliation Discussion

Thomas Becker Philadelphia University The minutes were a good reflection of the meetings. Liked how the report was written.

Wesley Firkin Thackray Crane / UBOAP The report was well written ‐ negative impacts to business could be more stressed in the report.

Adeolu Bakare McNees, Wallace & Nurick

Report was a good effort. Surprised that where there seemed to be solid consensus i.e. Grandfathering it isn’t emphasized more in the report. Emphasizing those topics will help out in the rate case in a more effective manner. Recommended shortening the meeting summary section and lengthening the Summary and Conclusions. The core of report should come before the meeting summaries. Emphasize make it longer to make the report a more impactful. Recommended adding a discussion of how the IA/GA rate will be affected if the City gives out less credits than estimated. Describe if any groups were under‐represented. The report should tread carefully on impacts to reallocation within residential customers


To the extent possible, explain where there was general agreement when the majority of the group felt more or less along the same lines. It’s important to note that the way in which the process was designed only allowed the CAC to make decisions within a meeting – and not based upon cumulative impacts of decisions. Describe that some decisions were based on discussions isolated to individual meetings, rather than a comprehensive report with recommendations. Decisions were not built on one another ‐ only now do we get to look at the whole picture.


Fine with the report. The conclusion could be beefed up a bit. One direct discharger thread is not included in the report is providing special credits (e.g. riparian buffers) that are specific to direct dischargers.

Richard McClure Kennedy Wilson Properties The report is a good summation of the activities that took place. Appreciate the opportunity to provide some input.






The report is great. Great job. The movement from meter base to parcel base was a clear / sound way to pay for stormwater. With the caps and reallocation, make sure these changes are based on sound engineering and provide a matrix to reinforce the proposed changes. Add an appendix to the report on what PWD is moving forward with and provide any official recommendations.


Felt the report fairly reflected the concerns of all who were here. The relationship between cost and causation was made clear. The technical rigor of the approach showed good sound engineering and good rate making.


No comment on the report ‐ it’s fine. Recommend putting a summary up front; get to the meat of it. Beyond the report, there is no discussion of what we were going to get from PWD. Recommend follow‐up on the reallocation process and an audit of Black & Veatch’s information. On the positive side, an increased study could show stormwater costs being below current expenses and would bring stormwater costs down for all. The report doesn’t deal with residential customers, from whom a significant amount of revenue will be generated.

Paul Bonasch Perfecseal Philadelphia Appreciate being here. Manufacturing has a very small input into this process, even though the rate and available credits has a big impact on our industry as well.


Put the summary up from with a statement or provide a better bridge to the remaining part. The report is written based on how you want people to react. Recommend moving the summary forward and adding clarity in what you put behind the report and what your intent is. Be clear about how the report should/will be used.


The Report is okay. Not sold on the reallocation in the slightest. Page 4 mentions the topics of the residential rate structure. Cost reallocation directly impacts same residential rate payers that are not represented well within the CAC. What’s the effect on residential parcels? Report says it’s minimal, but not sure that’s true. Are there examples? Reallocation affects all customers/rate payers. Need a greater discussion about what this does to various residential rate payers. A greater discussion is needed around residential issues; there will be winners and losers, and some may need some relief. Concern that how to address residential rate payers (tiers, credits) doesn’t shine through in the report. It is hard to conclude this group can make a recommendation that impacts an unrepresented group.


Not sure I agree with some of the other’s points. The summary portion of the report is an outline without the details. There are no specifics on changes in the credits or changes to the DD credit. There is no explanation on the IA/GA credit cap for DDs of 65%. We need to really understand that the devil is in the details and that they have not been presented in enough detail. If PWD knows what changes are to be made to credits, they





should tell the CAC. If they don’t, they should caveat it in the report and make it clear that it is still under review/progress. DDs need to be discussed in more detail, only a two second overview is included in the report.


The report is well done and a good reminder of where we’ve been. Recommend moving the summary up front which may address a different audience’s concern. The draft report format was helpful for me but I went through the CAC process, whereas other readers will have not. Make it clear how people should use the report.

Most Important Topic/Issue Name Affiliation Discussion

Thomas Becker Philadelphia University Reallocation of stormwater to sanitary is most important if that’s really how the cost should be allocated. Don’t go back to meter based.


Most important to institute a 10% cap from fiscal year from 2010 to 2011 to extend the years to the increase and let it continually run out and allow businesses time to adjust. The impact of credit improvements on property value is important as well ‐ if I built something I want to be able to transfer improvement/credit to the next owner as it potentially affects the property value.

Adeolu Bakare McNees, Wallace & Nurick

Support the reallocation and the extended cap. Support grant program as low interest loans are nice but still require significant investment from the property owner. Grants show that the City is trying to reach out the impact customers and providing grant money shows that to the customers and helping business more so than any other program. Credits give the City less of an out than estimated. How will that affect the IA/GA rate? A system wide IA/GA rate divided into residential and non‐residential categories would help.

Maia Jachimowicz City of Philadelphia – Finance Reallocation of costs is the most important issue based on the scientific research that was done.


Besides reallocation, push fee in‐lieu or banking to the forefrontas the City has mechanisms to implement that and push forward water quality improvements on private sites.


Incentives for private on‐site stormwater management and credits are most important. Want to make sure nothing else implemented creates a disincentive. Does phase in or cap reduce incentive for people to do private on‐site management? What happens if PWD takes the pressure off of property owners to pursue credits?


Reallocation based on good science made sense at the time of the meeting. From our memberships perspective (BOMA) we need to look at that and see if we want to go through and validate that science. We feel bad for property owners such as




Wesley and David, who are the most aggrieved. The fairest way to deal with that seems to be capping so the change is manageable and dealt with over time.


If PWD gives a credit, you have to value it. PWD has to determine what the value of the credit is and have monetized costs. What is the effect of that practice? This needs good engineering. The monetary value for the credit has to make sense. Big part of credits and incentives should be cost avoidance for PWD. Cost is the whole reason we’re doing it. The movement from meter to parcel based charges seems the fairest way to pay for stormwater. Reallocation and caps have to be based on sound engineering. The group I represented won’t get benefit of reallocation and we will be helping to fund/subsidize the cap.


If there is a shortfall to occur through cap implementation, who pays? Fees need to go up to cover reduction in revenue from caps (non‐residential). When rubber hits the road in the rate case – how do you readjust for the incentives program? Most important topic is cost causation and relating the two. This should be approached with technical rigor – good sound engineering/good rate making.


The report presented a reduction to stormwater will be about $13M. The reduction was from $128M to 108.9M. What’s the real number? What’s the starting point? This is the first time we’ve seen a hard number. Recommend an audit of the cost data to make sure it is correct. Building on that we need to make sure everyone pays their due. From Wesley’s example, does his property really cause $100K worth of costs to PWD? With regard to Grandfathering, any transitions or changes should get there in a rational / manageable fashion so you don’t run of people out of business. Reallocation is important based on a true analysis of the demand. The study should continue to determine the actual stormwater program costs (e.g. costs for the Pennypack Creek versus other creeks). Location is a factor that should be considered. There are credits for non‐residential property owners, but nothing for residential. Understand implications for dealing with thousands of customers, but there is still no appeals process for residential customers. This should be split out/allowed. $60M comes from Residential land uses to pay for stormwater; 50% of stormwater costs. Collection rate needs to be recognized. Look at costs and recognize the money residential customers are paying.

Paul Bonasch Perfecseal Philadelphia The caps and credit banking concepts are intriguing. What can these concepts do for the rest of the City?


Cost reallocation directly impacts same residential rate payers that are not represented well within the CAC. What’s the effect on residential parcels? Report says it’s minimal, but not sure that’s true. Are there examples? Reallocation affects all




customers/rate payers. Need a greater discussion about what this does to various residential rate payers. All costs will be proportioned more heavily toward sewer. Credits for residential may be on the horizon but it may not provide the relief sought.

Joe Pyle Scattergood Foundation Continued discussion of the grant program and the loan program are important.


How do we avoid the perception that when credits are achieved by some, others are overcharged? Are people essentially overcharged if you don’t have that many applying/awarded? With regard to Direct Dischargers, if the property owner has a NPDES Permit, I’m treating what I need to treat: total discharge. Is this an authority/jurisdictional issue for PWD?


Allowing building owners in industrialized areas to pay into a credit banks seems potentially very valuable to them. Marrying the ideas of reallocation, fee in lieu, and banking seems to be a good answer. Reallocation is important because it is equitable and based on the science and the numbers ‐ it makes sense. Fee in lieu also makes sense, but need to present a strong rationale nexus between the fee to property owner/credit and reduction in costs.

As David Wolf was not in attendance, Wesley Firkin offered some additional commentary on David’s behalf. He noted that all of the CAC members of community want highest quality of life for Philadelphia. He felt the current system pits high‐rise owners versus large impervious owners. However, we all have a symbiotic relationship. When large impervious owners get hit, high rises deserve reduction. Large impervious didn’t necessarily deserve such a steep increase. City of Philadelphia is competing on a global market and needs to maintain the symbiotic relations. He felt that everyone including PWD should keep that in mind.



The following list summarizes the requested revisions to the draft CAC report suggested by the membership. • Further stress negative impacts from the current stormwater fee structure • Recognize SMPs in property value and allow transfer of credits • Provide grants not loans to help incentivize retrofits • Emphasize when the CAC reached consensus • Emphasize the summary and conclusions • Note suggested special Water Quality Credits unique to Direct Dischargers (e.g. Riparian Buffer credits) • Confirm reallocation is based upon sound science • Confirm cap is based on science • Provide a summary in the front of the report rather than the end • Detailing the cascading impacts in the report appendix • Note residential properties were treated as “second class citizens” during the process – many of the

changes suggested by the CAC won’t be extended to residential properties • Note that the report is built upon topics which were presented to the CAC in a piecemeal fashion and

their corresponding suggestions/opinions don’t necessarily consider the total impact of their decisions on customers

• Recommend more study around costs / an audit of PWD’s costs and budget • Consider how the report is to be used – Summary for the CAC versus Use in the upcoming rate case • “The devil is in the details” – the CAC was only given a limited amount of information • Note that these are preliminary recommendations • Note the symbiotic relationship between all businesses – impervious properties and high rises • PWD should provide additional communication to the CAC on what they are doing throughout the rate

case and into the future • Provide additional details on suggested revisions to the credit structure (i.e. 65% credit for Direct

Dischargers on the Delaware and Schuylkill Rivers) The following table summarizes topics noted as being most important to an individual member of the CAC. If other CAC members agreed or disagreed with a particular topic or issue – their position is noted as well.

What is most important to you?

Topic/Issue In Favor Not In Favor

Reallocation – “if it’s right” 6 2

Cap to extend phase in for most impacted customers 4

Grants 2

Fee in lieu/trading /banking 3

Incentives for On‐site Management 1

Don't create disincentives through other policies 1

Ensure cost causation basis 3

Use technical rigor 3

Loans 1



PWD Thoughts and Response PWD provided a general reaction to the CAC meetings and opinions, including specific thoughts or anticipated actions to be undertaken during the next rate case and in the future. Additionally, PWD provided a brief overview of the upcoming rate case process.

Themes As presented in the report, PWD noted that the following themes emerged throughout the course of the CAC meetings, and that much of these were informing/influencing PWD’s decisions leading in the upcoming rate case.

• Gradualism: the more impact, the greater amount of time needed for a transition • Predictability: consistency in policies is key • Obligations: changes should enhance, not detract, from regulatory and service requirements • Strong nexus: among rates, rate structure and cost • Decisions: sound science and technical rigor

PWD Goals for 2012 Rates Process PWD discussed their goals for the rates process and what changes they anticipate pursing. PWD cautioned the CAC that numbers presented in both the report and during the course of the CAC meetings shouldn’t be considered the final numbers as the final numbers will reflect the results of the rate study that is ongoing. The potential changes and anticipated impacts were presented to the CAC:

Reallocation Reallocation of costs from stormwater utility to sanitary sewer of approximately $17 million (14%) of FY2012 costs to sanitary sewer. Who is likely to be impacted by the proposed change:

• Negative impact: Small parcels with high water (sewer) usage; large metered customers • Positive impact: Small and large parcels with little or conservative water use

Direct Dischargers PWD is proposing changes to the current Direct Discharger (DD) credit policy. Parcels on the Delaware and Schuylkill rivers that have not installed management practices would receive peak flow control credit as they are not required to provide flood control in accordance with PWD regulations. The goal is to better align cost of service / program costs and align these with the IA/GA credits. Potential impacts from the proposed change:

• All DD parcels that currently receive 100% IA Credit o Reduction to approximately 65% IA and 65% of the underlying GA credit.

• Parcels could obtain some additional credit for existing flood control practices and practices that improve water quality.

Capping PWD is proposing to cap stormwater fee increases to no more than 10% and $100/month from one fiscal year to the next due to parcel based transitions or changes to the credit structure (excluding normal rate increases). Who is likely to be impacted by the proposed change:

• All customers who meet the above requirements. It is estimated that approximately 2,000 parcels can qualify.

• All non‐residential customers would share the cost of the cap as they are the only class of rate payers which will benefit from such a program.



Incentives Programs PWD plans to pursue the implementation of the following incentives programs. Current:

• Stormwater Management Incentives Program Loan ($5 million) • Stormwater Management Incentives Program Grant ($5 million)

o PWD is looking to launch the grant program in December and they want to provide grant money property owners looking to install BMPs. They hope that the grant will encourage retrofits on private properties that can treat both public and private runoff, as well as potentially treat multiple parcels.

PWD will also investigating the following incentives: • Recognition programs (short term) • TDRs and property tax credits (future)

Revised Credit Structure Revisions in credit criteria to address volume control, peak discharge reduction and water quality factors for IA and GA fees. As with the changes in the Direct Dischargers policy, the goal is to better align cost of service / program costs and the IA/GA credits. Who is likely to be impacted by the proposed change:

• Direct Dischargers • Current credit holders (impacts vary)

PWD will be reviewing the potential credit changes to evaluate the impacts to customers. Once finalized, PWD will update the credit manual to reflect the adopted changes. PWD will also be looking to evaluate/pilot the following potential future credit programs:

• Credit banking and trading • Fee in lieu

PWD will be looking to work with both the City (Finance, Commerce Departments, etc) as well as private businesses to help develop these programs and further the City’s common goals. The CAC felt there should be an executive summary at the beginning of the CAC report to document what PWD was moving forward with.

PWD Rates Process PWD then provided an overview of the rates process, as detailed in the following figure. The CAC was well timed as the CAC’s input was being considered from the onset of the rates process, which was anticipated to take anywhere from 6 months to a year to complete depending on the number of interveners and the testimony required. PWD expects to keep the CAC informed of the process as it moves forward and pointed out the rate filing and supporting information would be made public and posted to PWD”s website for the public’s information. PWD expressed that they hoped the CAC would stay involved throughout the rates process. It was noted that the Water Commissioner cannot be part of the process as he must render the final decision based on the recommendations and information provided by the hearing officer. If the Water Commissioner deviates from any of the recommendations provided, he will need to provide detailed reasoning. Additionally, any information sent directly to the Water Commissioner could not be considered if not part of the rates process. Therefore, the Water Commissioners could not attend the meeting to thank the CAC but he had expressed his gratitude for their time and input.



Figure 2 Rate Process FlowChart Figure 2 Rate Process FlowChart

Water Department prepares proposed rate and charges

Water Department gives written notice of proposed rates to City Council 30 days before filing of notice

Notice of proposed change filed with City’s Department of Records

Independent Hearing Officer and Public Advocate are selected by the Mayor, President of the City Council and the City Controller

Hearing Officer schedules Pre-Hearing Conference for all interested parties

Informal and Formal Hearing held before Hearing Officer

Public Hearing records compiled

Hearing Officer makes non-binding recommendations to Water Commissioner

Water Commissioner responds to Hearing Officer’s report and files decision

Revised rates and charges become effective 10 days later or a date thereafter

Written Comments Written Comments In order to be included in the initial rate filing, the CAC was asked to submit any written comments they might have to Joe Clare, PWD’s Deputy Commissioner for Finance and Administration by November 21st. Additional comments will be accepted after November 21 and will be forwarded to the hearing officer.

In order to be included in the initial rate filing, the CAC was asked to submit any written comments they might have to Joe Clare, PWD’s Deputy Commissioner for Finance and Administration by November 21st. Additional comments will be accepted after November 21 and will be forwarded to the hearing officer.

CAC Final Thoughts CAC Final Thoughts The CAC was asked if they had any outstanding concerns, final thoughts and what their desire was for communication going forward. The CAC was asked if they had any outstanding concerns, final thoughts and what their desire was for communication going forward. CAC Report Revisions CAC Report Revisions The CAC members inquired whether or not there would be any additional revisions to the CAC report. PWD noted that while they did not anticipate substantial changes to the report, an executive summary would be added and the comments and suggestions provided by the CAC at the final meeting would be considered. Those revisions that PWD agreed with would be incorporated and those which PWD did not would still be noted in the meeting summary which will be included with the appendix of the report. The CAC asked if they would have an opportunity to review the final version of the report and providing comments and feedback. PWD agreed to provide a revised copy of the report to the CAC the week of November 21st. The CAC was encouraged to provide

The CAC members inquired whether or not there would be any additional revisions to the CAC report. PWD noted that while they did not anticipate substantial changes to the report, an executive summary would be added and the comments and suggestions provided by the CAC at the final meeting would be considered. Those revisions that PWD agreed with would be incorporated and those which PWD did not would still be noted in the meeting summary which will be included with the appendix of the report. The CAC asked if they would have an opportunity to review the final version of the report and providing comments and feedback. PWD agreed to provide a revised copy of the report to the CAC the week of November 21st. The CAC was encouraged to provide



feedback and PWD changed the date for written comments to be included with the initial rate filing to December 2nd. As previously noted, all other comments received after that date would be forwarded to the hearing officer for the rates case. CAC Additional Thoughts A member of the CAC felt that the CAC and the report should tread carefully on impacts to reallocation within residential customers as they were under represented in the process. Another member added that the report doesn’t deal with residential properties and that a significant amount of revenue comes from residential customers. He noted that credits are only available for non‐residential properties and there was no appeals process for residential customers. PWD noted that targeted residential discussions were in the works and they would inform the CAC and invite members to participate if they desired.


First Name Last Name Affiliation Adeolu Bakare McNees, Wallace & Nurick











Sheilah M. Louis Esq. Philadelphia City Council – Legal





Harvey Rice City of Philadelphia – City Controller’s Office

Other Attendees

First Name Last Name Affiliation Joe Clare Philadelphia Water Department

Rina Cutler Mayor’s Office of Transportation and Utilities










Other Attendees




Deb McCarthy Philadelphia Water Department







appendix b - philadelphia water department cac report... · stormwater utility and rate...

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