the stormwater finance landscape stormwater landscape_final draft_0.pdfthe nironmental finance...
TRANSCRIPT
The Stormwater Finance LandscapeWhere Wersquove Come from and Where Wersquove Yet to Go
The Environmental Finance Center at UNC-Chapel Hill 3
AcknowledgementsWritten by Erin Riggs and Evan Kirk
This report is a product of the Environmental Finance Center at the University of North Carolina at Chapel Hill (EFC) Findings interpretations and conclusions included in this report are those of the author and do notnecessarily reflect the views of EFC funders the University of North Carolina the School of Government orthose who provided review
About the EFCThe EFC is part of a network of university-based centers that work on environmental issues including water resources solid waste management energy and land conservation The EFC partners with organizations across the United States to assist communities provide training and policy analysis services and disseminate tools and research on a variety of environmental finance and policy topics The EFC is dedicated to enhancing the ability of governments to provide environmental programs and services in fair effective and financially sustainable ways
Learn more at efcsoguncedu
copy 2019 Environmental Finance Centerat The University of North Carolina Chapel Hill
School of GovernmentKnapp-Sanders Building CB 3330
University of North Carolina at Chapel HillChapel Hill NC 27599-3330
efcsogunceduAll rights reserved
4 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
Introduction Calculating Capital Needs for Stormwater ManagementIn its 2017 Infrastructure Master Plan the North Carolina Department of Environmental Qualityrsquos Division of Water Infrastructure (DWI) estimated that over the next 20 years the combined capital needs for water and wastewater systems will range from $17 billion to $26 billion While this number alone may be daunting for local government utilities there are additional significant capital needs for stormwater infrastructure not included in those estimates Unfortunately in contrast to water and wastewater infrastructure costs it has been more challenging for entities to quantify costs associated with stormwater infrastructure needs Recently however there has been a change in this trend and more state and federal entities are starting to focus on identifying stormwater needs
In the past decade some states and the US Environmental Protection Agency (EPA) have conducted surveys or other analyses to help quantify capital needs for stormwater In 2012 EPA conducted the Clean Watersheds Needs Survey Based on the results of that survey EPA estimated that publicly owned wastewater collection and treatment facilities across the United States had a combined stormwater management need of $192 billion dollars1 EPArsquos calculation is based on the amount of capital needed for such systems to comply with the Clean Water Act In 2018 the Water Environment Federationrsquos (WEF) Stormwater Institute conducted a national survey of MS4 permittees resulting in a report that showed an estimated $75 billion annual funding gap and revealed top priorities and challenges across the country2
Additionally states like Massachusetts have conducted their own survey work and calculated estimated stormwater needs based on the responses In 2017 the Division of Local Mandates for Massachusetts published a report finding that the statersquos communities have combined water system spending needs in excess of $17 billion dollars including $158 billion for stormwater management Similarly in 2017 the Indiana Finance Authority calculated its own statersquos 20-year stormwater management spending needs as totaling $183 billion3
The ways in which entities calculate stormwater costs are evolving Utilities have a variety of infrastructure options to accomplish the goals of stormwater management and therefore it is more challenging to put a price tag on needs however it is critical for effective financial planning that utilities know and include stormwater management costs in their overall water system needs
1 httpswwwepagovcwns2 httpswaterfmcomwef-releases-first-ever-stormwater-needs-analysis-revealing-major-funding-gap3 httpwwwiacirspeaiupuiedudocumentsAttachmentDStormwaterCapitalandProgrammingNeedsUpdatepdf
The Environmental Finance Center at UNC-Chapel Hill 5
Challenges for Communities in Addressing Increasing Stormwater CostsAs clearly evidenced by the billions of dollars highlighted above communities will likely face new challenges as a result of the capital needs for financing stormwater management On one hand these additional costs are nothing newmdashhigh capital costs in the water sector have increasingly become a focus and justification for raising water and wastewater rates across the country Therefore communities should not be surprised to find that curbs culverts drains pipes and other traditional stormwater infrastructure have a shelf life and will need to be replaced in order to continue to manage stormwater effectively
On the other hand communities are seeing an increase in stormwater management costs related to planning and implementing water quality improvements resulting from state and federal regulatory drivers For example many communities have prepared watershed plans with millions of dollars of potential improvements Additionally area-specific water quality rules such as Jordan Lake and Falls Lake Nutrient Rules have led to preliminary estimates in the billions of dollars just for those two water bodies In order to comply with these different regulatory drivers communities will likely need to both implement new stormwater infrastructure and modify existing infrastructure and development
Many communities have experienced challenges when financing the replacement of failing pipes in their water or wastewater systems Because such a repair may be expensive a utility may have to raise its rates in order to cover the cost However stormwater management projects may present even more of a conundrum for communities stormwater projects often have long timelines with uncertain outcomes Some stormwater infrastructure such as a bioretention cell is implemented based on a formulaic estimate for how such infrastructure will manage stormwater which may or may not actually be consistent with the end results Additionally stormwater projects are often designed for one conventional storm threshold and the increase in severe weather events may make a significant stormwater infrastructure investment ineffective or obsolete much faster than a community has anticipated Like water and wastewater infrastructure projects stormwater investments also carry huge price tags and canrsquot be delayed or avoided if communities want to be in compliance with specific state or federal regulations But for communities without a dedicated source of revenue for stormwater infrastructure such high price tags cannot be addressed with an increase in rates
In North Carolina communities in certain watersheds are subject to state nutrient management strategies requiring nonpoint source reductions in nitrogen and phosphorus discharges Such communities often do feasibility studies in order to determine potential projects but many of the projects are expensive Particularly for communities without a dedicated source of stormwater revenue grant funding can be an effective incentive or enabling tool to finance such projects Unfortunately this can create an additional challenge because of the disconnect
6 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
between the funding source and the project planning Often by the time grant funds are available the projects that were previously identified may no longer be feasible or available particularly in communities where there is rapid growth and development Stormwater projects also vary tremendously in design scope and ownership in ways that influence cost For example depending on the type of project it could cost anywhere from $13 to over $7000 to remove a pound of nitrogen through a specific stormwater projectmdashsuch projects are often referred to as stormwater control measures (SCMs) or stormwater best practices (BMPs)
Unique Accounting Challenges When Financing Stormwater InfrastructureAssuming that communities can secure enough funding through stormwater utility fees municipal revenue bonds or grant funding to actually take on new capital projects stormwater infrastructure also presents unique accounting and governance challenges Unlike water and wastewater it is difficult to identify depreciation of assets with stormwater infrastructure and likewise it is difficult to determine whether stormwater fees are adequate to cover the depreciation of the assets In many cases meeting public stormwater goals may be best served by investing in privately owned stormwater SCMs which create additional challenges
In fact it is hard for communities to track and inventory stormwater assets in their communities Such assets include traditional infrastructure such as curbs and culverts which are not dissimilar from water and wastewater assets But stormwater assets also include distributed infrastructure around a community including assets that are privately owned on private land This lack of public ownership upkeep and maintenance can be a challenge in accounting for stormwater infrastructure needs and is not included in the balance sheet the same way that publicly owned assets would be
One mechanism some communities use to help fund and track privately owned infrastructure is through cost-share programs Such programs enable communities to co-finance stormwater infrastructure on private property and often include operation and maintenance agreements as part of the program This would enable the financing community to retain some sort of easement to the private property in order to monitor and ensure that the infrastructureassets are being maintained for a designated time period The City of Raleigh has a stormwater cost share program and has operation and maintenance agreements associated with the more complex and expensive projectsAdditionally the City of Charlotte has a floodplain buyout program which has purchased more than 400 flood-prone homes since 1999 using a proactive risk-based prioritization system This program has already avoided $25 million in damages and is projected to result in a long-term savings of $233 million for local state and federal disaster relief agencies
The Environmental Finance Center at UNC-Chapel Hill 7
The Current Stormwater Finance LandscapeIn 2017 there were 64 municipal stormwater utilities in North Carolina bringing in an estimated $208009005 in revenue that year Additionally there were three county stormwater utilities which brought in an estimated $17269729 In contrast there were only 56 municipal stormwater utilities in 2010 which brought in an estimated $138949938 in revenue Nine out of the 10 largest cities in the state currently have stormwater utilities as do 66 out of 97 MS4 Permit holders As of 2019 there are 81 municipal and five county stormwater utilities highlighting the trend to develop a designated source of revenue for stormwater is increasing across the state
According to a recent survey done by the EFC as of July 2018 the amount charged for stormwater services for a residential property with 3000 square feet of impervious surface in North Carolina ranges from $050 to $1544 per month with a median charge of $400 Of the 88 fee structures (some stormwater utilities have multiple fee structures) collected in the 2018-19 survey 13 (156 percent) raised their residential fees and one (12 percent) lowered its residential fees at 3000 square feet of impervious surface The table below shows the distribution of monthly stormwater fees for the 88 fee structures collected in this survey
It is important to point out that the figure above shows fees charged by different utilities without taking into account a utilityrsquos level of service or regulatory mandate Some utilities serve a relatively small population and others serve hundreds of thousands of residential properties On average a residential property served by a stormwater utility in North
Figure 1 Distribution of Monthly Stormwater Fees
8 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
Carolina will pay $668 per month for 3000 square feet of impervious surface4
With respect to how stormwater fees are being set there are a number of different types of fee structures Most stormwater utilities in the state have separate nonresidential stormwater fee schedules for nonresidential and residential properties While 62 of the 88 (705 percent) residential fee structures are flat fees (all properties pay the same fee) just 11 of the 80 nonresidential fee structures are flat fees (138 percent) This may be because there is far more variation in the size of nonresidential properties and there are administrative costs associated with calculating the impervious surface on properties
Charging a flat fee for all residential property customers greatly lowers this administrative cost However charging the same flat fee for both residential and nonresidential customers may mean a large nonresidential customer such as a big box store pays the same as the owner of a modest home Currently five of the 11 fee structures with nonresidential flat fees charge the same for nonresidential as they do for residential
Just over a quarter (273 percent) of the surveyed stormwater utilities have a residential fee structure which consists of a tiered flat fee Under this structure the utility has established a number of tiered fees that residential properties pay based on their estimated impervious service This results in smaller homes being charged a lesser fee than larger homes
Nonresidential fee structures primarily consist of a charge per equivalent residential unit (ERU) where the property pays a fee equal to the number of equivalent residential units of impervious surface multiplied by the ERU unit price As seen below in Figure 2 61 nonresidential fee structures (763 percent) charge a per ERU fee See the table below for a breakdown of structure type by bill type
4 httpefcwebuncedu20190225stormwater-utility-fees-in-north-carolina-now-and-then_ftn1
Figure 2 Stormwater Fee Types by Residential vs Nonresidential
The Environmental Finance Center at UNC-Chapel Hill 9
This is the third consecutive fiscal year and the fifth year overall in which the EFC has published the North Carolina Stormwater Fees and Fee Structures Survey The EFC has completed surveys in 2009-10 2011-12 2016-17 2017-18 and 2018-19 There have been 44 stormwater fee structures which have been included in all five of the surveys Eight of the 44 utilities (182 percent) have not raised their fees since we began collecting data and only one utility has raised fees in every year that we have surveyed
Of the 36 utilities that have raised fees at least once since 2010 eight have raised them at a rate slower than the CPI inflation rate5 of 152 percent since 2010 Sixteen of the 44 fee structures (364 percent) surveyed have residential fees at 3000 square feet that when adjusted for inflation are lower today than in 2010
What these trends represent from a fee setting standpoint is that unlike water and wastewater rates (where rates vary according to the costs identified in a capital improvement plan) most stormwater spending in North Carolina is based primarily on what is feasible with the revenue generated from the existing fee In other words utilities are not necessarily examining capital needs and basing stormwater utility fees on those needs which is why fees are not growing each year in the survey data
There are two stormwater utilities in the state that are charging higher fees to cover some infrastructure needs as well as basic costs including administration planning and operations Additionally some communities like Raleigh and Charlotte have additional stormwater revenue that is being used to do cost-sharebuyout programs which help to fund distributed infrastructure on private property That being said past EFC survey work identifies that most stormwater utilities are using fee revenues to cover only basic costs The EFC is putting together future survey questions geared toward stormwater fee setting and management which will hopefully help identify strategies utilities are using in attempt to match fees more closely to capital needs
2019 North Carolina Stormwater Fees Update Webinar and Poll In March 2019 the EFC conducted a webinar providing an update on North Carolina stormwater fees that was attended by many if not most of the stormwater utilities across the state As part of the webinar the EFC conducted polling questions to better understand the composition interests and needs of the group of webinar attendees The results of the initial survey questions will be used to develop a more in depth survey to be distributed across the state The webinar polling results found that stormwater capital expenditures are low but expected to increase over the next five years There is also moderate interest in funding stormwater
5 Ibid
10 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
capital expenditures with debt in the future as 46 percent of respondents indicated that their utility may borrow money for capital expenses in the next 5 years This is notable as just 11 percent of utilities indicated that they currently fund the majority of capital expenditures with debt Moreover utilities are experimenting with innovative funding and incentive programs as 61 percent of utilities indicated the possibility that they will implement or modify a fee credit program (a fee structure that incentivizes investments on private property by lowering fees) in the future and 57 percent of utilities indicated the possibility of implementing or modifying a cost share program similar to what Raleigh has done
Responses to the webinar polling are shown below
The Environmental Finance Center at UNC-Chapel Hill 11
12 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
The Environmental Finance Center at UNC-Chapel Hill 13
The Future of the Stormwater Finance LandscapeThere are future opportunities and inevitable changes that will have to be made to improve the finance and management of stormwater in North Carolina As is evidenced by the survey results above almost half of participants indicated that they were highly unlikely to utilize debt to finance stormwater infrastructure needs in the next 5 years Debt financing for stormwater infrastructure however has great potential and is an underutilized financing mechanism It is also clear from the EFC rate data for stormwater utilities across the state the revenue generation is far from matching up with the capital needs identified in other survey work Additionally there are many communities with stormwater challenges that do
14 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
not have stormwater utilities or other streams of sufficient revenue for this purpose Such communities will have to identify a mechanism to pay for stormwater needs particularly in places facing drastic increases in water quality impacts of stormwater tightening and enforcement of federal and state regulations and growing concerns about flood mitigation The potential for debt financing existsmdashhowever underutilizedmdashand provides the option for low-interest finance that may benefit communities going forward
Even when utilized however debt financing will still not provide enough revenue to address stormwater management needs going forward without additional sources of dedicated revenue to pay back loans As a simple starting point for stormwater debt capacity the EFC used current stormwater operating revenue totals in 2017 as estimated by the data the EFC has collected and estimated how much debt could be supported at a 2 percent interest rate over a 20 year term For example if we assume that 25 percent of existing operating revenues could be used for debt communities statewide could raise $930 million in the next few years This falls significantly short of current projected needs
Other parts of the country face similar challenges For example in 2018 Los Angeles County voters approved by referendum a county-wide special parcel tax of 25 cents per square foot of impervious surface in order to fund the Safe Clean Water Program The Safe Clean Water Program includes senior citizen exemptions and will include a system of tradeable credits for reductions in or treatment of stormwater pollution This special parcel tax is expected to raise more than $300 million annually for stormwater management Other areas are experimenting with other approaches but most are consistently founded on mechanisms that generate significant new sources of revenue
Without that type of commitment and creativity it is difficult to imagine how significant progress can be made in this area Communities are going to have to identify dedicated sources of revenue for stormwater and to be more intentional about matching revenue generation with capital needs as the future of the North Carolina stormwater landscape develops
The Environmental Finance Center at UNC-Chapel Hill 3
AcknowledgementsWritten by Erin Riggs and Evan Kirk
This report is a product of the Environmental Finance Center at the University of North Carolina at Chapel Hill (EFC) Findings interpretations and conclusions included in this report are those of the author and do notnecessarily reflect the views of EFC funders the University of North Carolina the School of Government orthose who provided review
About the EFCThe EFC is part of a network of university-based centers that work on environmental issues including water resources solid waste management energy and land conservation The EFC partners with organizations across the United States to assist communities provide training and policy analysis services and disseminate tools and research on a variety of environmental finance and policy topics The EFC is dedicated to enhancing the ability of governments to provide environmental programs and services in fair effective and financially sustainable ways
Learn more at efcsoguncedu
copy 2019 Environmental Finance Centerat The University of North Carolina Chapel Hill
School of GovernmentKnapp-Sanders Building CB 3330
University of North Carolina at Chapel HillChapel Hill NC 27599-3330
efcsogunceduAll rights reserved
4 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
Introduction Calculating Capital Needs for Stormwater ManagementIn its 2017 Infrastructure Master Plan the North Carolina Department of Environmental Qualityrsquos Division of Water Infrastructure (DWI) estimated that over the next 20 years the combined capital needs for water and wastewater systems will range from $17 billion to $26 billion While this number alone may be daunting for local government utilities there are additional significant capital needs for stormwater infrastructure not included in those estimates Unfortunately in contrast to water and wastewater infrastructure costs it has been more challenging for entities to quantify costs associated with stormwater infrastructure needs Recently however there has been a change in this trend and more state and federal entities are starting to focus on identifying stormwater needs
In the past decade some states and the US Environmental Protection Agency (EPA) have conducted surveys or other analyses to help quantify capital needs for stormwater In 2012 EPA conducted the Clean Watersheds Needs Survey Based on the results of that survey EPA estimated that publicly owned wastewater collection and treatment facilities across the United States had a combined stormwater management need of $192 billion dollars1 EPArsquos calculation is based on the amount of capital needed for such systems to comply with the Clean Water Act In 2018 the Water Environment Federationrsquos (WEF) Stormwater Institute conducted a national survey of MS4 permittees resulting in a report that showed an estimated $75 billion annual funding gap and revealed top priorities and challenges across the country2
Additionally states like Massachusetts have conducted their own survey work and calculated estimated stormwater needs based on the responses In 2017 the Division of Local Mandates for Massachusetts published a report finding that the statersquos communities have combined water system spending needs in excess of $17 billion dollars including $158 billion for stormwater management Similarly in 2017 the Indiana Finance Authority calculated its own statersquos 20-year stormwater management spending needs as totaling $183 billion3
The ways in which entities calculate stormwater costs are evolving Utilities have a variety of infrastructure options to accomplish the goals of stormwater management and therefore it is more challenging to put a price tag on needs however it is critical for effective financial planning that utilities know and include stormwater management costs in their overall water system needs
1 httpswwwepagovcwns2 httpswaterfmcomwef-releases-first-ever-stormwater-needs-analysis-revealing-major-funding-gap3 httpwwwiacirspeaiupuiedudocumentsAttachmentDStormwaterCapitalandProgrammingNeedsUpdatepdf
The Environmental Finance Center at UNC-Chapel Hill 5
Challenges for Communities in Addressing Increasing Stormwater CostsAs clearly evidenced by the billions of dollars highlighted above communities will likely face new challenges as a result of the capital needs for financing stormwater management On one hand these additional costs are nothing newmdashhigh capital costs in the water sector have increasingly become a focus and justification for raising water and wastewater rates across the country Therefore communities should not be surprised to find that curbs culverts drains pipes and other traditional stormwater infrastructure have a shelf life and will need to be replaced in order to continue to manage stormwater effectively
On the other hand communities are seeing an increase in stormwater management costs related to planning and implementing water quality improvements resulting from state and federal regulatory drivers For example many communities have prepared watershed plans with millions of dollars of potential improvements Additionally area-specific water quality rules such as Jordan Lake and Falls Lake Nutrient Rules have led to preliminary estimates in the billions of dollars just for those two water bodies In order to comply with these different regulatory drivers communities will likely need to both implement new stormwater infrastructure and modify existing infrastructure and development
Many communities have experienced challenges when financing the replacement of failing pipes in their water or wastewater systems Because such a repair may be expensive a utility may have to raise its rates in order to cover the cost However stormwater management projects may present even more of a conundrum for communities stormwater projects often have long timelines with uncertain outcomes Some stormwater infrastructure such as a bioretention cell is implemented based on a formulaic estimate for how such infrastructure will manage stormwater which may or may not actually be consistent with the end results Additionally stormwater projects are often designed for one conventional storm threshold and the increase in severe weather events may make a significant stormwater infrastructure investment ineffective or obsolete much faster than a community has anticipated Like water and wastewater infrastructure projects stormwater investments also carry huge price tags and canrsquot be delayed or avoided if communities want to be in compliance with specific state or federal regulations But for communities without a dedicated source of revenue for stormwater infrastructure such high price tags cannot be addressed with an increase in rates
In North Carolina communities in certain watersheds are subject to state nutrient management strategies requiring nonpoint source reductions in nitrogen and phosphorus discharges Such communities often do feasibility studies in order to determine potential projects but many of the projects are expensive Particularly for communities without a dedicated source of stormwater revenue grant funding can be an effective incentive or enabling tool to finance such projects Unfortunately this can create an additional challenge because of the disconnect
6 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
between the funding source and the project planning Often by the time grant funds are available the projects that were previously identified may no longer be feasible or available particularly in communities where there is rapid growth and development Stormwater projects also vary tremendously in design scope and ownership in ways that influence cost For example depending on the type of project it could cost anywhere from $13 to over $7000 to remove a pound of nitrogen through a specific stormwater projectmdashsuch projects are often referred to as stormwater control measures (SCMs) or stormwater best practices (BMPs)
Unique Accounting Challenges When Financing Stormwater InfrastructureAssuming that communities can secure enough funding through stormwater utility fees municipal revenue bonds or grant funding to actually take on new capital projects stormwater infrastructure also presents unique accounting and governance challenges Unlike water and wastewater it is difficult to identify depreciation of assets with stormwater infrastructure and likewise it is difficult to determine whether stormwater fees are adequate to cover the depreciation of the assets In many cases meeting public stormwater goals may be best served by investing in privately owned stormwater SCMs which create additional challenges
In fact it is hard for communities to track and inventory stormwater assets in their communities Such assets include traditional infrastructure such as curbs and culverts which are not dissimilar from water and wastewater assets But stormwater assets also include distributed infrastructure around a community including assets that are privately owned on private land This lack of public ownership upkeep and maintenance can be a challenge in accounting for stormwater infrastructure needs and is not included in the balance sheet the same way that publicly owned assets would be
One mechanism some communities use to help fund and track privately owned infrastructure is through cost-share programs Such programs enable communities to co-finance stormwater infrastructure on private property and often include operation and maintenance agreements as part of the program This would enable the financing community to retain some sort of easement to the private property in order to monitor and ensure that the infrastructureassets are being maintained for a designated time period The City of Raleigh has a stormwater cost share program and has operation and maintenance agreements associated with the more complex and expensive projectsAdditionally the City of Charlotte has a floodplain buyout program which has purchased more than 400 flood-prone homes since 1999 using a proactive risk-based prioritization system This program has already avoided $25 million in damages and is projected to result in a long-term savings of $233 million for local state and federal disaster relief agencies
The Environmental Finance Center at UNC-Chapel Hill 7
The Current Stormwater Finance LandscapeIn 2017 there were 64 municipal stormwater utilities in North Carolina bringing in an estimated $208009005 in revenue that year Additionally there were three county stormwater utilities which brought in an estimated $17269729 In contrast there were only 56 municipal stormwater utilities in 2010 which brought in an estimated $138949938 in revenue Nine out of the 10 largest cities in the state currently have stormwater utilities as do 66 out of 97 MS4 Permit holders As of 2019 there are 81 municipal and five county stormwater utilities highlighting the trend to develop a designated source of revenue for stormwater is increasing across the state
According to a recent survey done by the EFC as of July 2018 the amount charged for stormwater services for a residential property with 3000 square feet of impervious surface in North Carolina ranges from $050 to $1544 per month with a median charge of $400 Of the 88 fee structures (some stormwater utilities have multiple fee structures) collected in the 2018-19 survey 13 (156 percent) raised their residential fees and one (12 percent) lowered its residential fees at 3000 square feet of impervious surface The table below shows the distribution of monthly stormwater fees for the 88 fee structures collected in this survey
It is important to point out that the figure above shows fees charged by different utilities without taking into account a utilityrsquos level of service or regulatory mandate Some utilities serve a relatively small population and others serve hundreds of thousands of residential properties On average a residential property served by a stormwater utility in North
Figure 1 Distribution of Monthly Stormwater Fees
8 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
Carolina will pay $668 per month for 3000 square feet of impervious surface4
With respect to how stormwater fees are being set there are a number of different types of fee structures Most stormwater utilities in the state have separate nonresidential stormwater fee schedules for nonresidential and residential properties While 62 of the 88 (705 percent) residential fee structures are flat fees (all properties pay the same fee) just 11 of the 80 nonresidential fee structures are flat fees (138 percent) This may be because there is far more variation in the size of nonresidential properties and there are administrative costs associated with calculating the impervious surface on properties
Charging a flat fee for all residential property customers greatly lowers this administrative cost However charging the same flat fee for both residential and nonresidential customers may mean a large nonresidential customer such as a big box store pays the same as the owner of a modest home Currently five of the 11 fee structures with nonresidential flat fees charge the same for nonresidential as they do for residential
Just over a quarter (273 percent) of the surveyed stormwater utilities have a residential fee structure which consists of a tiered flat fee Under this structure the utility has established a number of tiered fees that residential properties pay based on their estimated impervious service This results in smaller homes being charged a lesser fee than larger homes
Nonresidential fee structures primarily consist of a charge per equivalent residential unit (ERU) where the property pays a fee equal to the number of equivalent residential units of impervious surface multiplied by the ERU unit price As seen below in Figure 2 61 nonresidential fee structures (763 percent) charge a per ERU fee See the table below for a breakdown of structure type by bill type
4 httpefcwebuncedu20190225stormwater-utility-fees-in-north-carolina-now-and-then_ftn1
Figure 2 Stormwater Fee Types by Residential vs Nonresidential
The Environmental Finance Center at UNC-Chapel Hill 9
This is the third consecutive fiscal year and the fifth year overall in which the EFC has published the North Carolina Stormwater Fees and Fee Structures Survey The EFC has completed surveys in 2009-10 2011-12 2016-17 2017-18 and 2018-19 There have been 44 stormwater fee structures which have been included in all five of the surveys Eight of the 44 utilities (182 percent) have not raised their fees since we began collecting data and only one utility has raised fees in every year that we have surveyed
Of the 36 utilities that have raised fees at least once since 2010 eight have raised them at a rate slower than the CPI inflation rate5 of 152 percent since 2010 Sixteen of the 44 fee structures (364 percent) surveyed have residential fees at 3000 square feet that when adjusted for inflation are lower today than in 2010
What these trends represent from a fee setting standpoint is that unlike water and wastewater rates (where rates vary according to the costs identified in a capital improvement plan) most stormwater spending in North Carolina is based primarily on what is feasible with the revenue generated from the existing fee In other words utilities are not necessarily examining capital needs and basing stormwater utility fees on those needs which is why fees are not growing each year in the survey data
There are two stormwater utilities in the state that are charging higher fees to cover some infrastructure needs as well as basic costs including administration planning and operations Additionally some communities like Raleigh and Charlotte have additional stormwater revenue that is being used to do cost-sharebuyout programs which help to fund distributed infrastructure on private property That being said past EFC survey work identifies that most stormwater utilities are using fee revenues to cover only basic costs The EFC is putting together future survey questions geared toward stormwater fee setting and management which will hopefully help identify strategies utilities are using in attempt to match fees more closely to capital needs
2019 North Carolina Stormwater Fees Update Webinar and Poll In March 2019 the EFC conducted a webinar providing an update on North Carolina stormwater fees that was attended by many if not most of the stormwater utilities across the state As part of the webinar the EFC conducted polling questions to better understand the composition interests and needs of the group of webinar attendees The results of the initial survey questions will be used to develop a more in depth survey to be distributed across the state The webinar polling results found that stormwater capital expenditures are low but expected to increase over the next five years There is also moderate interest in funding stormwater
5 Ibid
10 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
capital expenditures with debt in the future as 46 percent of respondents indicated that their utility may borrow money for capital expenses in the next 5 years This is notable as just 11 percent of utilities indicated that they currently fund the majority of capital expenditures with debt Moreover utilities are experimenting with innovative funding and incentive programs as 61 percent of utilities indicated the possibility that they will implement or modify a fee credit program (a fee structure that incentivizes investments on private property by lowering fees) in the future and 57 percent of utilities indicated the possibility of implementing or modifying a cost share program similar to what Raleigh has done
Responses to the webinar polling are shown below
The Environmental Finance Center at UNC-Chapel Hill 11
12 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
The Environmental Finance Center at UNC-Chapel Hill 13
The Future of the Stormwater Finance LandscapeThere are future opportunities and inevitable changes that will have to be made to improve the finance and management of stormwater in North Carolina As is evidenced by the survey results above almost half of participants indicated that they were highly unlikely to utilize debt to finance stormwater infrastructure needs in the next 5 years Debt financing for stormwater infrastructure however has great potential and is an underutilized financing mechanism It is also clear from the EFC rate data for stormwater utilities across the state the revenue generation is far from matching up with the capital needs identified in other survey work Additionally there are many communities with stormwater challenges that do
14 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
not have stormwater utilities or other streams of sufficient revenue for this purpose Such communities will have to identify a mechanism to pay for stormwater needs particularly in places facing drastic increases in water quality impacts of stormwater tightening and enforcement of federal and state regulations and growing concerns about flood mitigation The potential for debt financing existsmdashhowever underutilizedmdashand provides the option for low-interest finance that may benefit communities going forward
Even when utilized however debt financing will still not provide enough revenue to address stormwater management needs going forward without additional sources of dedicated revenue to pay back loans As a simple starting point for stormwater debt capacity the EFC used current stormwater operating revenue totals in 2017 as estimated by the data the EFC has collected and estimated how much debt could be supported at a 2 percent interest rate over a 20 year term For example if we assume that 25 percent of existing operating revenues could be used for debt communities statewide could raise $930 million in the next few years This falls significantly short of current projected needs
Other parts of the country face similar challenges For example in 2018 Los Angeles County voters approved by referendum a county-wide special parcel tax of 25 cents per square foot of impervious surface in order to fund the Safe Clean Water Program The Safe Clean Water Program includes senior citizen exemptions and will include a system of tradeable credits for reductions in or treatment of stormwater pollution This special parcel tax is expected to raise more than $300 million annually for stormwater management Other areas are experimenting with other approaches but most are consistently founded on mechanisms that generate significant new sources of revenue
Without that type of commitment and creativity it is difficult to imagine how significant progress can be made in this area Communities are going to have to identify dedicated sources of revenue for stormwater and to be more intentional about matching revenue generation with capital needs as the future of the North Carolina stormwater landscape develops
4 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
Introduction Calculating Capital Needs for Stormwater ManagementIn its 2017 Infrastructure Master Plan the North Carolina Department of Environmental Qualityrsquos Division of Water Infrastructure (DWI) estimated that over the next 20 years the combined capital needs for water and wastewater systems will range from $17 billion to $26 billion While this number alone may be daunting for local government utilities there are additional significant capital needs for stormwater infrastructure not included in those estimates Unfortunately in contrast to water and wastewater infrastructure costs it has been more challenging for entities to quantify costs associated with stormwater infrastructure needs Recently however there has been a change in this trend and more state and federal entities are starting to focus on identifying stormwater needs
In the past decade some states and the US Environmental Protection Agency (EPA) have conducted surveys or other analyses to help quantify capital needs for stormwater In 2012 EPA conducted the Clean Watersheds Needs Survey Based on the results of that survey EPA estimated that publicly owned wastewater collection and treatment facilities across the United States had a combined stormwater management need of $192 billion dollars1 EPArsquos calculation is based on the amount of capital needed for such systems to comply with the Clean Water Act In 2018 the Water Environment Federationrsquos (WEF) Stormwater Institute conducted a national survey of MS4 permittees resulting in a report that showed an estimated $75 billion annual funding gap and revealed top priorities and challenges across the country2
Additionally states like Massachusetts have conducted their own survey work and calculated estimated stormwater needs based on the responses In 2017 the Division of Local Mandates for Massachusetts published a report finding that the statersquos communities have combined water system spending needs in excess of $17 billion dollars including $158 billion for stormwater management Similarly in 2017 the Indiana Finance Authority calculated its own statersquos 20-year stormwater management spending needs as totaling $183 billion3
The ways in which entities calculate stormwater costs are evolving Utilities have a variety of infrastructure options to accomplish the goals of stormwater management and therefore it is more challenging to put a price tag on needs however it is critical for effective financial planning that utilities know and include stormwater management costs in their overall water system needs
1 httpswwwepagovcwns2 httpswaterfmcomwef-releases-first-ever-stormwater-needs-analysis-revealing-major-funding-gap3 httpwwwiacirspeaiupuiedudocumentsAttachmentDStormwaterCapitalandProgrammingNeedsUpdatepdf
The Environmental Finance Center at UNC-Chapel Hill 5
Challenges for Communities in Addressing Increasing Stormwater CostsAs clearly evidenced by the billions of dollars highlighted above communities will likely face new challenges as a result of the capital needs for financing stormwater management On one hand these additional costs are nothing newmdashhigh capital costs in the water sector have increasingly become a focus and justification for raising water and wastewater rates across the country Therefore communities should not be surprised to find that curbs culverts drains pipes and other traditional stormwater infrastructure have a shelf life and will need to be replaced in order to continue to manage stormwater effectively
On the other hand communities are seeing an increase in stormwater management costs related to planning and implementing water quality improvements resulting from state and federal regulatory drivers For example many communities have prepared watershed plans with millions of dollars of potential improvements Additionally area-specific water quality rules such as Jordan Lake and Falls Lake Nutrient Rules have led to preliminary estimates in the billions of dollars just for those two water bodies In order to comply with these different regulatory drivers communities will likely need to both implement new stormwater infrastructure and modify existing infrastructure and development
Many communities have experienced challenges when financing the replacement of failing pipes in their water or wastewater systems Because such a repair may be expensive a utility may have to raise its rates in order to cover the cost However stormwater management projects may present even more of a conundrum for communities stormwater projects often have long timelines with uncertain outcomes Some stormwater infrastructure such as a bioretention cell is implemented based on a formulaic estimate for how such infrastructure will manage stormwater which may or may not actually be consistent with the end results Additionally stormwater projects are often designed for one conventional storm threshold and the increase in severe weather events may make a significant stormwater infrastructure investment ineffective or obsolete much faster than a community has anticipated Like water and wastewater infrastructure projects stormwater investments also carry huge price tags and canrsquot be delayed or avoided if communities want to be in compliance with specific state or federal regulations But for communities without a dedicated source of revenue for stormwater infrastructure such high price tags cannot be addressed with an increase in rates
In North Carolina communities in certain watersheds are subject to state nutrient management strategies requiring nonpoint source reductions in nitrogen and phosphorus discharges Such communities often do feasibility studies in order to determine potential projects but many of the projects are expensive Particularly for communities without a dedicated source of stormwater revenue grant funding can be an effective incentive or enabling tool to finance such projects Unfortunately this can create an additional challenge because of the disconnect
6 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
between the funding source and the project planning Often by the time grant funds are available the projects that were previously identified may no longer be feasible or available particularly in communities where there is rapid growth and development Stormwater projects also vary tremendously in design scope and ownership in ways that influence cost For example depending on the type of project it could cost anywhere from $13 to over $7000 to remove a pound of nitrogen through a specific stormwater projectmdashsuch projects are often referred to as stormwater control measures (SCMs) or stormwater best practices (BMPs)
Unique Accounting Challenges When Financing Stormwater InfrastructureAssuming that communities can secure enough funding through stormwater utility fees municipal revenue bonds or grant funding to actually take on new capital projects stormwater infrastructure also presents unique accounting and governance challenges Unlike water and wastewater it is difficult to identify depreciation of assets with stormwater infrastructure and likewise it is difficult to determine whether stormwater fees are adequate to cover the depreciation of the assets In many cases meeting public stormwater goals may be best served by investing in privately owned stormwater SCMs which create additional challenges
In fact it is hard for communities to track and inventory stormwater assets in their communities Such assets include traditional infrastructure such as curbs and culverts which are not dissimilar from water and wastewater assets But stormwater assets also include distributed infrastructure around a community including assets that are privately owned on private land This lack of public ownership upkeep and maintenance can be a challenge in accounting for stormwater infrastructure needs and is not included in the balance sheet the same way that publicly owned assets would be
One mechanism some communities use to help fund and track privately owned infrastructure is through cost-share programs Such programs enable communities to co-finance stormwater infrastructure on private property and often include operation and maintenance agreements as part of the program This would enable the financing community to retain some sort of easement to the private property in order to monitor and ensure that the infrastructureassets are being maintained for a designated time period The City of Raleigh has a stormwater cost share program and has operation and maintenance agreements associated with the more complex and expensive projectsAdditionally the City of Charlotte has a floodplain buyout program which has purchased more than 400 flood-prone homes since 1999 using a proactive risk-based prioritization system This program has already avoided $25 million in damages and is projected to result in a long-term savings of $233 million for local state and federal disaster relief agencies
The Environmental Finance Center at UNC-Chapel Hill 7
The Current Stormwater Finance LandscapeIn 2017 there were 64 municipal stormwater utilities in North Carolina bringing in an estimated $208009005 in revenue that year Additionally there were three county stormwater utilities which brought in an estimated $17269729 In contrast there were only 56 municipal stormwater utilities in 2010 which brought in an estimated $138949938 in revenue Nine out of the 10 largest cities in the state currently have stormwater utilities as do 66 out of 97 MS4 Permit holders As of 2019 there are 81 municipal and five county stormwater utilities highlighting the trend to develop a designated source of revenue for stormwater is increasing across the state
According to a recent survey done by the EFC as of July 2018 the amount charged for stormwater services for a residential property with 3000 square feet of impervious surface in North Carolina ranges from $050 to $1544 per month with a median charge of $400 Of the 88 fee structures (some stormwater utilities have multiple fee structures) collected in the 2018-19 survey 13 (156 percent) raised their residential fees and one (12 percent) lowered its residential fees at 3000 square feet of impervious surface The table below shows the distribution of monthly stormwater fees for the 88 fee structures collected in this survey
It is important to point out that the figure above shows fees charged by different utilities without taking into account a utilityrsquos level of service or regulatory mandate Some utilities serve a relatively small population and others serve hundreds of thousands of residential properties On average a residential property served by a stormwater utility in North
Figure 1 Distribution of Monthly Stormwater Fees
8 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
Carolina will pay $668 per month for 3000 square feet of impervious surface4
With respect to how stormwater fees are being set there are a number of different types of fee structures Most stormwater utilities in the state have separate nonresidential stormwater fee schedules for nonresidential and residential properties While 62 of the 88 (705 percent) residential fee structures are flat fees (all properties pay the same fee) just 11 of the 80 nonresidential fee structures are flat fees (138 percent) This may be because there is far more variation in the size of nonresidential properties and there are administrative costs associated with calculating the impervious surface on properties
Charging a flat fee for all residential property customers greatly lowers this administrative cost However charging the same flat fee for both residential and nonresidential customers may mean a large nonresidential customer such as a big box store pays the same as the owner of a modest home Currently five of the 11 fee structures with nonresidential flat fees charge the same for nonresidential as they do for residential
Just over a quarter (273 percent) of the surveyed stormwater utilities have a residential fee structure which consists of a tiered flat fee Under this structure the utility has established a number of tiered fees that residential properties pay based on their estimated impervious service This results in smaller homes being charged a lesser fee than larger homes
Nonresidential fee structures primarily consist of a charge per equivalent residential unit (ERU) where the property pays a fee equal to the number of equivalent residential units of impervious surface multiplied by the ERU unit price As seen below in Figure 2 61 nonresidential fee structures (763 percent) charge a per ERU fee See the table below for a breakdown of structure type by bill type
4 httpefcwebuncedu20190225stormwater-utility-fees-in-north-carolina-now-and-then_ftn1
Figure 2 Stormwater Fee Types by Residential vs Nonresidential
The Environmental Finance Center at UNC-Chapel Hill 9
This is the third consecutive fiscal year and the fifth year overall in which the EFC has published the North Carolina Stormwater Fees and Fee Structures Survey The EFC has completed surveys in 2009-10 2011-12 2016-17 2017-18 and 2018-19 There have been 44 stormwater fee structures which have been included in all five of the surveys Eight of the 44 utilities (182 percent) have not raised their fees since we began collecting data and only one utility has raised fees in every year that we have surveyed
Of the 36 utilities that have raised fees at least once since 2010 eight have raised them at a rate slower than the CPI inflation rate5 of 152 percent since 2010 Sixteen of the 44 fee structures (364 percent) surveyed have residential fees at 3000 square feet that when adjusted for inflation are lower today than in 2010
What these trends represent from a fee setting standpoint is that unlike water and wastewater rates (where rates vary according to the costs identified in a capital improvement plan) most stormwater spending in North Carolina is based primarily on what is feasible with the revenue generated from the existing fee In other words utilities are not necessarily examining capital needs and basing stormwater utility fees on those needs which is why fees are not growing each year in the survey data
There are two stormwater utilities in the state that are charging higher fees to cover some infrastructure needs as well as basic costs including administration planning and operations Additionally some communities like Raleigh and Charlotte have additional stormwater revenue that is being used to do cost-sharebuyout programs which help to fund distributed infrastructure on private property That being said past EFC survey work identifies that most stormwater utilities are using fee revenues to cover only basic costs The EFC is putting together future survey questions geared toward stormwater fee setting and management which will hopefully help identify strategies utilities are using in attempt to match fees more closely to capital needs
2019 North Carolina Stormwater Fees Update Webinar and Poll In March 2019 the EFC conducted a webinar providing an update on North Carolina stormwater fees that was attended by many if not most of the stormwater utilities across the state As part of the webinar the EFC conducted polling questions to better understand the composition interests and needs of the group of webinar attendees The results of the initial survey questions will be used to develop a more in depth survey to be distributed across the state The webinar polling results found that stormwater capital expenditures are low but expected to increase over the next five years There is also moderate interest in funding stormwater
5 Ibid
10 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
capital expenditures with debt in the future as 46 percent of respondents indicated that their utility may borrow money for capital expenses in the next 5 years This is notable as just 11 percent of utilities indicated that they currently fund the majority of capital expenditures with debt Moreover utilities are experimenting with innovative funding and incentive programs as 61 percent of utilities indicated the possibility that they will implement or modify a fee credit program (a fee structure that incentivizes investments on private property by lowering fees) in the future and 57 percent of utilities indicated the possibility of implementing or modifying a cost share program similar to what Raleigh has done
Responses to the webinar polling are shown below
The Environmental Finance Center at UNC-Chapel Hill 11
12 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
The Environmental Finance Center at UNC-Chapel Hill 13
The Future of the Stormwater Finance LandscapeThere are future opportunities and inevitable changes that will have to be made to improve the finance and management of stormwater in North Carolina As is evidenced by the survey results above almost half of participants indicated that they were highly unlikely to utilize debt to finance stormwater infrastructure needs in the next 5 years Debt financing for stormwater infrastructure however has great potential and is an underutilized financing mechanism It is also clear from the EFC rate data for stormwater utilities across the state the revenue generation is far from matching up with the capital needs identified in other survey work Additionally there are many communities with stormwater challenges that do
14 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
not have stormwater utilities or other streams of sufficient revenue for this purpose Such communities will have to identify a mechanism to pay for stormwater needs particularly in places facing drastic increases in water quality impacts of stormwater tightening and enforcement of federal and state regulations and growing concerns about flood mitigation The potential for debt financing existsmdashhowever underutilizedmdashand provides the option for low-interest finance that may benefit communities going forward
Even when utilized however debt financing will still not provide enough revenue to address stormwater management needs going forward without additional sources of dedicated revenue to pay back loans As a simple starting point for stormwater debt capacity the EFC used current stormwater operating revenue totals in 2017 as estimated by the data the EFC has collected and estimated how much debt could be supported at a 2 percent interest rate over a 20 year term For example if we assume that 25 percent of existing operating revenues could be used for debt communities statewide could raise $930 million in the next few years This falls significantly short of current projected needs
Other parts of the country face similar challenges For example in 2018 Los Angeles County voters approved by referendum a county-wide special parcel tax of 25 cents per square foot of impervious surface in order to fund the Safe Clean Water Program The Safe Clean Water Program includes senior citizen exemptions and will include a system of tradeable credits for reductions in or treatment of stormwater pollution This special parcel tax is expected to raise more than $300 million annually for stormwater management Other areas are experimenting with other approaches but most are consistently founded on mechanisms that generate significant new sources of revenue
Without that type of commitment and creativity it is difficult to imagine how significant progress can be made in this area Communities are going to have to identify dedicated sources of revenue for stormwater and to be more intentional about matching revenue generation with capital needs as the future of the North Carolina stormwater landscape develops
The Environmental Finance Center at UNC-Chapel Hill 5
Challenges for Communities in Addressing Increasing Stormwater CostsAs clearly evidenced by the billions of dollars highlighted above communities will likely face new challenges as a result of the capital needs for financing stormwater management On one hand these additional costs are nothing newmdashhigh capital costs in the water sector have increasingly become a focus and justification for raising water and wastewater rates across the country Therefore communities should not be surprised to find that curbs culverts drains pipes and other traditional stormwater infrastructure have a shelf life and will need to be replaced in order to continue to manage stormwater effectively
On the other hand communities are seeing an increase in stormwater management costs related to planning and implementing water quality improvements resulting from state and federal regulatory drivers For example many communities have prepared watershed plans with millions of dollars of potential improvements Additionally area-specific water quality rules such as Jordan Lake and Falls Lake Nutrient Rules have led to preliminary estimates in the billions of dollars just for those two water bodies In order to comply with these different regulatory drivers communities will likely need to both implement new stormwater infrastructure and modify existing infrastructure and development
Many communities have experienced challenges when financing the replacement of failing pipes in their water or wastewater systems Because such a repair may be expensive a utility may have to raise its rates in order to cover the cost However stormwater management projects may present even more of a conundrum for communities stormwater projects often have long timelines with uncertain outcomes Some stormwater infrastructure such as a bioretention cell is implemented based on a formulaic estimate for how such infrastructure will manage stormwater which may or may not actually be consistent with the end results Additionally stormwater projects are often designed for one conventional storm threshold and the increase in severe weather events may make a significant stormwater infrastructure investment ineffective or obsolete much faster than a community has anticipated Like water and wastewater infrastructure projects stormwater investments also carry huge price tags and canrsquot be delayed or avoided if communities want to be in compliance with specific state or federal regulations But for communities without a dedicated source of revenue for stormwater infrastructure such high price tags cannot be addressed with an increase in rates
In North Carolina communities in certain watersheds are subject to state nutrient management strategies requiring nonpoint source reductions in nitrogen and phosphorus discharges Such communities often do feasibility studies in order to determine potential projects but many of the projects are expensive Particularly for communities without a dedicated source of stormwater revenue grant funding can be an effective incentive or enabling tool to finance such projects Unfortunately this can create an additional challenge because of the disconnect
6 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
between the funding source and the project planning Often by the time grant funds are available the projects that were previously identified may no longer be feasible or available particularly in communities where there is rapid growth and development Stormwater projects also vary tremendously in design scope and ownership in ways that influence cost For example depending on the type of project it could cost anywhere from $13 to over $7000 to remove a pound of nitrogen through a specific stormwater projectmdashsuch projects are often referred to as stormwater control measures (SCMs) or stormwater best practices (BMPs)
Unique Accounting Challenges When Financing Stormwater InfrastructureAssuming that communities can secure enough funding through stormwater utility fees municipal revenue bonds or grant funding to actually take on new capital projects stormwater infrastructure also presents unique accounting and governance challenges Unlike water and wastewater it is difficult to identify depreciation of assets with stormwater infrastructure and likewise it is difficult to determine whether stormwater fees are adequate to cover the depreciation of the assets In many cases meeting public stormwater goals may be best served by investing in privately owned stormwater SCMs which create additional challenges
In fact it is hard for communities to track and inventory stormwater assets in their communities Such assets include traditional infrastructure such as curbs and culverts which are not dissimilar from water and wastewater assets But stormwater assets also include distributed infrastructure around a community including assets that are privately owned on private land This lack of public ownership upkeep and maintenance can be a challenge in accounting for stormwater infrastructure needs and is not included in the balance sheet the same way that publicly owned assets would be
One mechanism some communities use to help fund and track privately owned infrastructure is through cost-share programs Such programs enable communities to co-finance stormwater infrastructure on private property and often include operation and maintenance agreements as part of the program This would enable the financing community to retain some sort of easement to the private property in order to monitor and ensure that the infrastructureassets are being maintained for a designated time period The City of Raleigh has a stormwater cost share program and has operation and maintenance agreements associated with the more complex and expensive projectsAdditionally the City of Charlotte has a floodplain buyout program which has purchased more than 400 flood-prone homes since 1999 using a proactive risk-based prioritization system This program has already avoided $25 million in damages and is projected to result in a long-term savings of $233 million for local state and federal disaster relief agencies
The Environmental Finance Center at UNC-Chapel Hill 7
The Current Stormwater Finance LandscapeIn 2017 there were 64 municipal stormwater utilities in North Carolina bringing in an estimated $208009005 in revenue that year Additionally there were three county stormwater utilities which brought in an estimated $17269729 In contrast there were only 56 municipal stormwater utilities in 2010 which brought in an estimated $138949938 in revenue Nine out of the 10 largest cities in the state currently have stormwater utilities as do 66 out of 97 MS4 Permit holders As of 2019 there are 81 municipal and five county stormwater utilities highlighting the trend to develop a designated source of revenue for stormwater is increasing across the state
According to a recent survey done by the EFC as of July 2018 the amount charged for stormwater services for a residential property with 3000 square feet of impervious surface in North Carolina ranges from $050 to $1544 per month with a median charge of $400 Of the 88 fee structures (some stormwater utilities have multiple fee structures) collected in the 2018-19 survey 13 (156 percent) raised their residential fees and one (12 percent) lowered its residential fees at 3000 square feet of impervious surface The table below shows the distribution of monthly stormwater fees for the 88 fee structures collected in this survey
It is important to point out that the figure above shows fees charged by different utilities without taking into account a utilityrsquos level of service or regulatory mandate Some utilities serve a relatively small population and others serve hundreds of thousands of residential properties On average a residential property served by a stormwater utility in North
Figure 1 Distribution of Monthly Stormwater Fees
8 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
Carolina will pay $668 per month for 3000 square feet of impervious surface4
With respect to how stormwater fees are being set there are a number of different types of fee structures Most stormwater utilities in the state have separate nonresidential stormwater fee schedules for nonresidential and residential properties While 62 of the 88 (705 percent) residential fee structures are flat fees (all properties pay the same fee) just 11 of the 80 nonresidential fee structures are flat fees (138 percent) This may be because there is far more variation in the size of nonresidential properties and there are administrative costs associated with calculating the impervious surface on properties
Charging a flat fee for all residential property customers greatly lowers this administrative cost However charging the same flat fee for both residential and nonresidential customers may mean a large nonresidential customer such as a big box store pays the same as the owner of a modest home Currently five of the 11 fee structures with nonresidential flat fees charge the same for nonresidential as they do for residential
Just over a quarter (273 percent) of the surveyed stormwater utilities have a residential fee structure which consists of a tiered flat fee Under this structure the utility has established a number of tiered fees that residential properties pay based on their estimated impervious service This results in smaller homes being charged a lesser fee than larger homes
Nonresidential fee structures primarily consist of a charge per equivalent residential unit (ERU) where the property pays a fee equal to the number of equivalent residential units of impervious surface multiplied by the ERU unit price As seen below in Figure 2 61 nonresidential fee structures (763 percent) charge a per ERU fee See the table below for a breakdown of structure type by bill type
4 httpefcwebuncedu20190225stormwater-utility-fees-in-north-carolina-now-and-then_ftn1
Figure 2 Stormwater Fee Types by Residential vs Nonresidential
The Environmental Finance Center at UNC-Chapel Hill 9
This is the third consecutive fiscal year and the fifth year overall in which the EFC has published the North Carolina Stormwater Fees and Fee Structures Survey The EFC has completed surveys in 2009-10 2011-12 2016-17 2017-18 and 2018-19 There have been 44 stormwater fee structures which have been included in all five of the surveys Eight of the 44 utilities (182 percent) have not raised their fees since we began collecting data and only one utility has raised fees in every year that we have surveyed
Of the 36 utilities that have raised fees at least once since 2010 eight have raised them at a rate slower than the CPI inflation rate5 of 152 percent since 2010 Sixteen of the 44 fee structures (364 percent) surveyed have residential fees at 3000 square feet that when adjusted for inflation are lower today than in 2010
What these trends represent from a fee setting standpoint is that unlike water and wastewater rates (where rates vary according to the costs identified in a capital improvement plan) most stormwater spending in North Carolina is based primarily on what is feasible with the revenue generated from the existing fee In other words utilities are not necessarily examining capital needs and basing stormwater utility fees on those needs which is why fees are not growing each year in the survey data
There are two stormwater utilities in the state that are charging higher fees to cover some infrastructure needs as well as basic costs including administration planning and operations Additionally some communities like Raleigh and Charlotte have additional stormwater revenue that is being used to do cost-sharebuyout programs which help to fund distributed infrastructure on private property That being said past EFC survey work identifies that most stormwater utilities are using fee revenues to cover only basic costs The EFC is putting together future survey questions geared toward stormwater fee setting and management which will hopefully help identify strategies utilities are using in attempt to match fees more closely to capital needs
2019 North Carolina Stormwater Fees Update Webinar and Poll In March 2019 the EFC conducted a webinar providing an update on North Carolina stormwater fees that was attended by many if not most of the stormwater utilities across the state As part of the webinar the EFC conducted polling questions to better understand the composition interests and needs of the group of webinar attendees The results of the initial survey questions will be used to develop a more in depth survey to be distributed across the state The webinar polling results found that stormwater capital expenditures are low but expected to increase over the next five years There is also moderate interest in funding stormwater
5 Ibid
10 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
capital expenditures with debt in the future as 46 percent of respondents indicated that their utility may borrow money for capital expenses in the next 5 years This is notable as just 11 percent of utilities indicated that they currently fund the majority of capital expenditures with debt Moreover utilities are experimenting with innovative funding and incentive programs as 61 percent of utilities indicated the possibility that they will implement or modify a fee credit program (a fee structure that incentivizes investments on private property by lowering fees) in the future and 57 percent of utilities indicated the possibility of implementing or modifying a cost share program similar to what Raleigh has done
Responses to the webinar polling are shown below
The Environmental Finance Center at UNC-Chapel Hill 11
12 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
The Environmental Finance Center at UNC-Chapel Hill 13
The Future of the Stormwater Finance LandscapeThere are future opportunities and inevitable changes that will have to be made to improve the finance and management of stormwater in North Carolina As is evidenced by the survey results above almost half of participants indicated that they were highly unlikely to utilize debt to finance stormwater infrastructure needs in the next 5 years Debt financing for stormwater infrastructure however has great potential and is an underutilized financing mechanism It is also clear from the EFC rate data for stormwater utilities across the state the revenue generation is far from matching up with the capital needs identified in other survey work Additionally there are many communities with stormwater challenges that do
14 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
not have stormwater utilities or other streams of sufficient revenue for this purpose Such communities will have to identify a mechanism to pay for stormwater needs particularly in places facing drastic increases in water quality impacts of stormwater tightening and enforcement of federal and state regulations and growing concerns about flood mitigation The potential for debt financing existsmdashhowever underutilizedmdashand provides the option for low-interest finance that may benefit communities going forward
Even when utilized however debt financing will still not provide enough revenue to address stormwater management needs going forward without additional sources of dedicated revenue to pay back loans As a simple starting point for stormwater debt capacity the EFC used current stormwater operating revenue totals in 2017 as estimated by the data the EFC has collected and estimated how much debt could be supported at a 2 percent interest rate over a 20 year term For example if we assume that 25 percent of existing operating revenues could be used for debt communities statewide could raise $930 million in the next few years This falls significantly short of current projected needs
Other parts of the country face similar challenges For example in 2018 Los Angeles County voters approved by referendum a county-wide special parcel tax of 25 cents per square foot of impervious surface in order to fund the Safe Clean Water Program The Safe Clean Water Program includes senior citizen exemptions and will include a system of tradeable credits for reductions in or treatment of stormwater pollution This special parcel tax is expected to raise more than $300 million annually for stormwater management Other areas are experimenting with other approaches but most are consistently founded on mechanisms that generate significant new sources of revenue
Without that type of commitment and creativity it is difficult to imagine how significant progress can be made in this area Communities are going to have to identify dedicated sources of revenue for stormwater and to be more intentional about matching revenue generation with capital needs as the future of the North Carolina stormwater landscape develops
6 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
between the funding source and the project planning Often by the time grant funds are available the projects that were previously identified may no longer be feasible or available particularly in communities where there is rapid growth and development Stormwater projects also vary tremendously in design scope and ownership in ways that influence cost For example depending on the type of project it could cost anywhere from $13 to over $7000 to remove a pound of nitrogen through a specific stormwater projectmdashsuch projects are often referred to as stormwater control measures (SCMs) or stormwater best practices (BMPs)
Unique Accounting Challenges When Financing Stormwater InfrastructureAssuming that communities can secure enough funding through stormwater utility fees municipal revenue bonds or grant funding to actually take on new capital projects stormwater infrastructure also presents unique accounting and governance challenges Unlike water and wastewater it is difficult to identify depreciation of assets with stormwater infrastructure and likewise it is difficult to determine whether stormwater fees are adequate to cover the depreciation of the assets In many cases meeting public stormwater goals may be best served by investing in privately owned stormwater SCMs which create additional challenges
In fact it is hard for communities to track and inventory stormwater assets in their communities Such assets include traditional infrastructure such as curbs and culverts which are not dissimilar from water and wastewater assets But stormwater assets also include distributed infrastructure around a community including assets that are privately owned on private land This lack of public ownership upkeep and maintenance can be a challenge in accounting for stormwater infrastructure needs and is not included in the balance sheet the same way that publicly owned assets would be
One mechanism some communities use to help fund and track privately owned infrastructure is through cost-share programs Such programs enable communities to co-finance stormwater infrastructure on private property and often include operation and maintenance agreements as part of the program This would enable the financing community to retain some sort of easement to the private property in order to monitor and ensure that the infrastructureassets are being maintained for a designated time period The City of Raleigh has a stormwater cost share program and has operation and maintenance agreements associated with the more complex and expensive projectsAdditionally the City of Charlotte has a floodplain buyout program which has purchased more than 400 flood-prone homes since 1999 using a proactive risk-based prioritization system This program has already avoided $25 million in damages and is projected to result in a long-term savings of $233 million for local state and federal disaster relief agencies
The Environmental Finance Center at UNC-Chapel Hill 7
The Current Stormwater Finance LandscapeIn 2017 there were 64 municipal stormwater utilities in North Carolina bringing in an estimated $208009005 in revenue that year Additionally there were three county stormwater utilities which brought in an estimated $17269729 In contrast there were only 56 municipal stormwater utilities in 2010 which brought in an estimated $138949938 in revenue Nine out of the 10 largest cities in the state currently have stormwater utilities as do 66 out of 97 MS4 Permit holders As of 2019 there are 81 municipal and five county stormwater utilities highlighting the trend to develop a designated source of revenue for stormwater is increasing across the state
According to a recent survey done by the EFC as of July 2018 the amount charged for stormwater services for a residential property with 3000 square feet of impervious surface in North Carolina ranges from $050 to $1544 per month with a median charge of $400 Of the 88 fee structures (some stormwater utilities have multiple fee structures) collected in the 2018-19 survey 13 (156 percent) raised their residential fees and one (12 percent) lowered its residential fees at 3000 square feet of impervious surface The table below shows the distribution of monthly stormwater fees for the 88 fee structures collected in this survey
It is important to point out that the figure above shows fees charged by different utilities without taking into account a utilityrsquos level of service or regulatory mandate Some utilities serve a relatively small population and others serve hundreds of thousands of residential properties On average a residential property served by a stormwater utility in North
Figure 1 Distribution of Monthly Stormwater Fees
8 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
Carolina will pay $668 per month for 3000 square feet of impervious surface4
With respect to how stormwater fees are being set there are a number of different types of fee structures Most stormwater utilities in the state have separate nonresidential stormwater fee schedules for nonresidential and residential properties While 62 of the 88 (705 percent) residential fee structures are flat fees (all properties pay the same fee) just 11 of the 80 nonresidential fee structures are flat fees (138 percent) This may be because there is far more variation in the size of nonresidential properties and there are administrative costs associated with calculating the impervious surface on properties
Charging a flat fee for all residential property customers greatly lowers this administrative cost However charging the same flat fee for both residential and nonresidential customers may mean a large nonresidential customer such as a big box store pays the same as the owner of a modest home Currently five of the 11 fee structures with nonresidential flat fees charge the same for nonresidential as they do for residential
Just over a quarter (273 percent) of the surveyed stormwater utilities have a residential fee structure which consists of a tiered flat fee Under this structure the utility has established a number of tiered fees that residential properties pay based on their estimated impervious service This results in smaller homes being charged a lesser fee than larger homes
Nonresidential fee structures primarily consist of a charge per equivalent residential unit (ERU) where the property pays a fee equal to the number of equivalent residential units of impervious surface multiplied by the ERU unit price As seen below in Figure 2 61 nonresidential fee structures (763 percent) charge a per ERU fee See the table below for a breakdown of structure type by bill type
4 httpefcwebuncedu20190225stormwater-utility-fees-in-north-carolina-now-and-then_ftn1
Figure 2 Stormwater Fee Types by Residential vs Nonresidential
The Environmental Finance Center at UNC-Chapel Hill 9
This is the third consecutive fiscal year and the fifth year overall in which the EFC has published the North Carolina Stormwater Fees and Fee Structures Survey The EFC has completed surveys in 2009-10 2011-12 2016-17 2017-18 and 2018-19 There have been 44 stormwater fee structures which have been included in all five of the surveys Eight of the 44 utilities (182 percent) have not raised their fees since we began collecting data and only one utility has raised fees in every year that we have surveyed
Of the 36 utilities that have raised fees at least once since 2010 eight have raised them at a rate slower than the CPI inflation rate5 of 152 percent since 2010 Sixteen of the 44 fee structures (364 percent) surveyed have residential fees at 3000 square feet that when adjusted for inflation are lower today than in 2010
What these trends represent from a fee setting standpoint is that unlike water and wastewater rates (where rates vary according to the costs identified in a capital improvement plan) most stormwater spending in North Carolina is based primarily on what is feasible with the revenue generated from the existing fee In other words utilities are not necessarily examining capital needs and basing stormwater utility fees on those needs which is why fees are not growing each year in the survey data
There are two stormwater utilities in the state that are charging higher fees to cover some infrastructure needs as well as basic costs including administration planning and operations Additionally some communities like Raleigh and Charlotte have additional stormwater revenue that is being used to do cost-sharebuyout programs which help to fund distributed infrastructure on private property That being said past EFC survey work identifies that most stormwater utilities are using fee revenues to cover only basic costs The EFC is putting together future survey questions geared toward stormwater fee setting and management which will hopefully help identify strategies utilities are using in attempt to match fees more closely to capital needs
2019 North Carolina Stormwater Fees Update Webinar and Poll In March 2019 the EFC conducted a webinar providing an update on North Carolina stormwater fees that was attended by many if not most of the stormwater utilities across the state As part of the webinar the EFC conducted polling questions to better understand the composition interests and needs of the group of webinar attendees The results of the initial survey questions will be used to develop a more in depth survey to be distributed across the state The webinar polling results found that stormwater capital expenditures are low but expected to increase over the next five years There is also moderate interest in funding stormwater
5 Ibid
10 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
capital expenditures with debt in the future as 46 percent of respondents indicated that their utility may borrow money for capital expenses in the next 5 years This is notable as just 11 percent of utilities indicated that they currently fund the majority of capital expenditures with debt Moreover utilities are experimenting with innovative funding and incentive programs as 61 percent of utilities indicated the possibility that they will implement or modify a fee credit program (a fee structure that incentivizes investments on private property by lowering fees) in the future and 57 percent of utilities indicated the possibility of implementing or modifying a cost share program similar to what Raleigh has done
Responses to the webinar polling are shown below
The Environmental Finance Center at UNC-Chapel Hill 11
12 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
The Environmental Finance Center at UNC-Chapel Hill 13
The Future of the Stormwater Finance LandscapeThere are future opportunities and inevitable changes that will have to be made to improve the finance and management of stormwater in North Carolina As is evidenced by the survey results above almost half of participants indicated that they were highly unlikely to utilize debt to finance stormwater infrastructure needs in the next 5 years Debt financing for stormwater infrastructure however has great potential and is an underutilized financing mechanism It is also clear from the EFC rate data for stormwater utilities across the state the revenue generation is far from matching up with the capital needs identified in other survey work Additionally there are many communities with stormwater challenges that do
14 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
not have stormwater utilities or other streams of sufficient revenue for this purpose Such communities will have to identify a mechanism to pay for stormwater needs particularly in places facing drastic increases in water quality impacts of stormwater tightening and enforcement of federal and state regulations and growing concerns about flood mitigation The potential for debt financing existsmdashhowever underutilizedmdashand provides the option for low-interest finance that may benefit communities going forward
Even when utilized however debt financing will still not provide enough revenue to address stormwater management needs going forward without additional sources of dedicated revenue to pay back loans As a simple starting point for stormwater debt capacity the EFC used current stormwater operating revenue totals in 2017 as estimated by the data the EFC has collected and estimated how much debt could be supported at a 2 percent interest rate over a 20 year term For example if we assume that 25 percent of existing operating revenues could be used for debt communities statewide could raise $930 million in the next few years This falls significantly short of current projected needs
Other parts of the country face similar challenges For example in 2018 Los Angeles County voters approved by referendum a county-wide special parcel tax of 25 cents per square foot of impervious surface in order to fund the Safe Clean Water Program The Safe Clean Water Program includes senior citizen exemptions and will include a system of tradeable credits for reductions in or treatment of stormwater pollution This special parcel tax is expected to raise more than $300 million annually for stormwater management Other areas are experimenting with other approaches but most are consistently founded on mechanisms that generate significant new sources of revenue
Without that type of commitment and creativity it is difficult to imagine how significant progress can be made in this area Communities are going to have to identify dedicated sources of revenue for stormwater and to be more intentional about matching revenue generation with capital needs as the future of the North Carolina stormwater landscape develops
The Environmental Finance Center at UNC-Chapel Hill 7
The Current Stormwater Finance LandscapeIn 2017 there were 64 municipal stormwater utilities in North Carolina bringing in an estimated $208009005 in revenue that year Additionally there were three county stormwater utilities which brought in an estimated $17269729 In contrast there were only 56 municipal stormwater utilities in 2010 which brought in an estimated $138949938 in revenue Nine out of the 10 largest cities in the state currently have stormwater utilities as do 66 out of 97 MS4 Permit holders As of 2019 there are 81 municipal and five county stormwater utilities highlighting the trend to develop a designated source of revenue for stormwater is increasing across the state
According to a recent survey done by the EFC as of July 2018 the amount charged for stormwater services for a residential property with 3000 square feet of impervious surface in North Carolina ranges from $050 to $1544 per month with a median charge of $400 Of the 88 fee structures (some stormwater utilities have multiple fee structures) collected in the 2018-19 survey 13 (156 percent) raised their residential fees and one (12 percent) lowered its residential fees at 3000 square feet of impervious surface The table below shows the distribution of monthly stormwater fees for the 88 fee structures collected in this survey
It is important to point out that the figure above shows fees charged by different utilities without taking into account a utilityrsquos level of service or regulatory mandate Some utilities serve a relatively small population and others serve hundreds of thousands of residential properties On average a residential property served by a stormwater utility in North
Figure 1 Distribution of Monthly Stormwater Fees
8 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
Carolina will pay $668 per month for 3000 square feet of impervious surface4
With respect to how stormwater fees are being set there are a number of different types of fee structures Most stormwater utilities in the state have separate nonresidential stormwater fee schedules for nonresidential and residential properties While 62 of the 88 (705 percent) residential fee structures are flat fees (all properties pay the same fee) just 11 of the 80 nonresidential fee structures are flat fees (138 percent) This may be because there is far more variation in the size of nonresidential properties and there are administrative costs associated with calculating the impervious surface on properties
Charging a flat fee for all residential property customers greatly lowers this administrative cost However charging the same flat fee for both residential and nonresidential customers may mean a large nonresidential customer such as a big box store pays the same as the owner of a modest home Currently five of the 11 fee structures with nonresidential flat fees charge the same for nonresidential as they do for residential
Just over a quarter (273 percent) of the surveyed stormwater utilities have a residential fee structure which consists of a tiered flat fee Under this structure the utility has established a number of tiered fees that residential properties pay based on their estimated impervious service This results in smaller homes being charged a lesser fee than larger homes
Nonresidential fee structures primarily consist of a charge per equivalent residential unit (ERU) where the property pays a fee equal to the number of equivalent residential units of impervious surface multiplied by the ERU unit price As seen below in Figure 2 61 nonresidential fee structures (763 percent) charge a per ERU fee See the table below for a breakdown of structure type by bill type
4 httpefcwebuncedu20190225stormwater-utility-fees-in-north-carolina-now-and-then_ftn1
Figure 2 Stormwater Fee Types by Residential vs Nonresidential
The Environmental Finance Center at UNC-Chapel Hill 9
This is the third consecutive fiscal year and the fifth year overall in which the EFC has published the North Carolina Stormwater Fees and Fee Structures Survey The EFC has completed surveys in 2009-10 2011-12 2016-17 2017-18 and 2018-19 There have been 44 stormwater fee structures which have been included in all five of the surveys Eight of the 44 utilities (182 percent) have not raised their fees since we began collecting data and only one utility has raised fees in every year that we have surveyed
Of the 36 utilities that have raised fees at least once since 2010 eight have raised them at a rate slower than the CPI inflation rate5 of 152 percent since 2010 Sixteen of the 44 fee structures (364 percent) surveyed have residential fees at 3000 square feet that when adjusted for inflation are lower today than in 2010
What these trends represent from a fee setting standpoint is that unlike water and wastewater rates (where rates vary according to the costs identified in a capital improvement plan) most stormwater spending in North Carolina is based primarily on what is feasible with the revenue generated from the existing fee In other words utilities are not necessarily examining capital needs and basing stormwater utility fees on those needs which is why fees are not growing each year in the survey data
There are two stormwater utilities in the state that are charging higher fees to cover some infrastructure needs as well as basic costs including administration planning and operations Additionally some communities like Raleigh and Charlotte have additional stormwater revenue that is being used to do cost-sharebuyout programs which help to fund distributed infrastructure on private property That being said past EFC survey work identifies that most stormwater utilities are using fee revenues to cover only basic costs The EFC is putting together future survey questions geared toward stormwater fee setting and management which will hopefully help identify strategies utilities are using in attempt to match fees more closely to capital needs
2019 North Carolina Stormwater Fees Update Webinar and Poll In March 2019 the EFC conducted a webinar providing an update on North Carolina stormwater fees that was attended by many if not most of the stormwater utilities across the state As part of the webinar the EFC conducted polling questions to better understand the composition interests and needs of the group of webinar attendees The results of the initial survey questions will be used to develop a more in depth survey to be distributed across the state The webinar polling results found that stormwater capital expenditures are low but expected to increase over the next five years There is also moderate interest in funding stormwater
5 Ibid
10 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
capital expenditures with debt in the future as 46 percent of respondents indicated that their utility may borrow money for capital expenses in the next 5 years This is notable as just 11 percent of utilities indicated that they currently fund the majority of capital expenditures with debt Moreover utilities are experimenting with innovative funding and incentive programs as 61 percent of utilities indicated the possibility that they will implement or modify a fee credit program (a fee structure that incentivizes investments on private property by lowering fees) in the future and 57 percent of utilities indicated the possibility of implementing or modifying a cost share program similar to what Raleigh has done
Responses to the webinar polling are shown below
The Environmental Finance Center at UNC-Chapel Hill 11
12 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
The Environmental Finance Center at UNC-Chapel Hill 13
The Future of the Stormwater Finance LandscapeThere are future opportunities and inevitable changes that will have to be made to improve the finance and management of stormwater in North Carolina As is evidenced by the survey results above almost half of participants indicated that they were highly unlikely to utilize debt to finance stormwater infrastructure needs in the next 5 years Debt financing for stormwater infrastructure however has great potential and is an underutilized financing mechanism It is also clear from the EFC rate data for stormwater utilities across the state the revenue generation is far from matching up with the capital needs identified in other survey work Additionally there are many communities with stormwater challenges that do
14 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
not have stormwater utilities or other streams of sufficient revenue for this purpose Such communities will have to identify a mechanism to pay for stormwater needs particularly in places facing drastic increases in water quality impacts of stormwater tightening and enforcement of federal and state regulations and growing concerns about flood mitigation The potential for debt financing existsmdashhowever underutilizedmdashand provides the option for low-interest finance that may benefit communities going forward
Even when utilized however debt financing will still not provide enough revenue to address stormwater management needs going forward without additional sources of dedicated revenue to pay back loans As a simple starting point for stormwater debt capacity the EFC used current stormwater operating revenue totals in 2017 as estimated by the data the EFC has collected and estimated how much debt could be supported at a 2 percent interest rate over a 20 year term For example if we assume that 25 percent of existing operating revenues could be used for debt communities statewide could raise $930 million in the next few years This falls significantly short of current projected needs
Other parts of the country face similar challenges For example in 2018 Los Angeles County voters approved by referendum a county-wide special parcel tax of 25 cents per square foot of impervious surface in order to fund the Safe Clean Water Program The Safe Clean Water Program includes senior citizen exemptions and will include a system of tradeable credits for reductions in or treatment of stormwater pollution This special parcel tax is expected to raise more than $300 million annually for stormwater management Other areas are experimenting with other approaches but most are consistently founded on mechanisms that generate significant new sources of revenue
Without that type of commitment and creativity it is difficult to imagine how significant progress can be made in this area Communities are going to have to identify dedicated sources of revenue for stormwater and to be more intentional about matching revenue generation with capital needs as the future of the North Carolina stormwater landscape develops
8 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
Carolina will pay $668 per month for 3000 square feet of impervious surface4
With respect to how stormwater fees are being set there are a number of different types of fee structures Most stormwater utilities in the state have separate nonresidential stormwater fee schedules for nonresidential and residential properties While 62 of the 88 (705 percent) residential fee structures are flat fees (all properties pay the same fee) just 11 of the 80 nonresidential fee structures are flat fees (138 percent) This may be because there is far more variation in the size of nonresidential properties and there are administrative costs associated with calculating the impervious surface on properties
Charging a flat fee for all residential property customers greatly lowers this administrative cost However charging the same flat fee for both residential and nonresidential customers may mean a large nonresidential customer such as a big box store pays the same as the owner of a modest home Currently five of the 11 fee structures with nonresidential flat fees charge the same for nonresidential as they do for residential
Just over a quarter (273 percent) of the surveyed stormwater utilities have a residential fee structure which consists of a tiered flat fee Under this structure the utility has established a number of tiered fees that residential properties pay based on their estimated impervious service This results in smaller homes being charged a lesser fee than larger homes
Nonresidential fee structures primarily consist of a charge per equivalent residential unit (ERU) where the property pays a fee equal to the number of equivalent residential units of impervious surface multiplied by the ERU unit price As seen below in Figure 2 61 nonresidential fee structures (763 percent) charge a per ERU fee See the table below for a breakdown of structure type by bill type
4 httpefcwebuncedu20190225stormwater-utility-fees-in-north-carolina-now-and-then_ftn1
Figure 2 Stormwater Fee Types by Residential vs Nonresidential
The Environmental Finance Center at UNC-Chapel Hill 9
This is the third consecutive fiscal year and the fifth year overall in which the EFC has published the North Carolina Stormwater Fees and Fee Structures Survey The EFC has completed surveys in 2009-10 2011-12 2016-17 2017-18 and 2018-19 There have been 44 stormwater fee structures which have been included in all five of the surveys Eight of the 44 utilities (182 percent) have not raised their fees since we began collecting data and only one utility has raised fees in every year that we have surveyed
Of the 36 utilities that have raised fees at least once since 2010 eight have raised them at a rate slower than the CPI inflation rate5 of 152 percent since 2010 Sixteen of the 44 fee structures (364 percent) surveyed have residential fees at 3000 square feet that when adjusted for inflation are lower today than in 2010
What these trends represent from a fee setting standpoint is that unlike water and wastewater rates (where rates vary according to the costs identified in a capital improvement plan) most stormwater spending in North Carolina is based primarily on what is feasible with the revenue generated from the existing fee In other words utilities are not necessarily examining capital needs and basing stormwater utility fees on those needs which is why fees are not growing each year in the survey data
There are two stormwater utilities in the state that are charging higher fees to cover some infrastructure needs as well as basic costs including administration planning and operations Additionally some communities like Raleigh and Charlotte have additional stormwater revenue that is being used to do cost-sharebuyout programs which help to fund distributed infrastructure on private property That being said past EFC survey work identifies that most stormwater utilities are using fee revenues to cover only basic costs The EFC is putting together future survey questions geared toward stormwater fee setting and management which will hopefully help identify strategies utilities are using in attempt to match fees more closely to capital needs
2019 North Carolina Stormwater Fees Update Webinar and Poll In March 2019 the EFC conducted a webinar providing an update on North Carolina stormwater fees that was attended by many if not most of the stormwater utilities across the state As part of the webinar the EFC conducted polling questions to better understand the composition interests and needs of the group of webinar attendees The results of the initial survey questions will be used to develop a more in depth survey to be distributed across the state The webinar polling results found that stormwater capital expenditures are low but expected to increase over the next five years There is also moderate interest in funding stormwater
5 Ibid
10 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
capital expenditures with debt in the future as 46 percent of respondents indicated that their utility may borrow money for capital expenses in the next 5 years This is notable as just 11 percent of utilities indicated that they currently fund the majority of capital expenditures with debt Moreover utilities are experimenting with innovative funding and incentive programs as 61 percent of utilities indicated the possibility that they will implement or modify a fee credit program (a fee structure that incentivizes investments on private property by lowering fees) in the future and 57 percent of utilities indicated the possibility of implementing or modifying a cost share program similar to what Raleigh has done
Responses to the webinar polling are shown below
The Environmental Finance Center at UNC-Chapel Hill 11
12 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
The Environmental Finance Center at UNC-Chapel Hill 13
The Future of the Stormwater Finance LandscapeThere are future opportunities and inevitable changes that will have to be made to improve the finance and management of stormwater in North Carolina As is evidenced by the survey results above almost half of participants indicated that they were highly unlikely to utilize debt to finance stormwater infrastructure needs in the next 5 years Debt financing for stormwater infrastructure however has great potential and is an underutilized financing mechanism It is also clear from the EFC rate data for stormwater utilities across the state the revenue generation is far from matching up with the capital needs identified in other survey work Additionally there are many communities with stormwater challenges that do
14 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
not have stormwater utilities or other streams of sufficient revenue for this purpose Such communities will have to identify a mechanism to pay for stormwater needs particularly in places facing drastic increases in water quality impacts of stormwater tightening and enforcement of federal and state regulations and growing concerns about flood mitigation The potential for debt financing existsmdashhowever underutilizedmdashand provides the option for low-interest finance that may benefit communities going forward
Even when utilized however debt financing will still not provide enough revenue to address stormwater management needs going forward without additional sources of dedicated revenue to pay back loans As a simple starting point for stormwater debt capacity the EFC used current stormwater operating revenue totals in 2017 as estimated by the data the EFC has collected and estimated how much debt could be supported at a 2 percent interest rate over a 20 year term For example if we assume that 25 percent of existing operating revenues could be used for debt communities statewide could raise $930 million in the next few years This falls significantly short of current projected needs
Other parts of the country face similar challenges For example in 2018 Los Angeles County voters approved by referendum a county-wide special parcel tax of 25 cents per square foot of impervious surface in order to fund the Safe Clean Water Program The Safe Clean Water Program includes senior citizen exemptions and will include a system of tradeable credits for reductions in or treatment of stormwater pollution This special parcel tax is expected to raise more than $300 million annually for stormwater management Other areas are experimenting with other approaches but most are consistently founded on mechanisms that generate significant new sources of revenue
Without that type of commitment and creativity it is difficult to imagine how significant progress can be made in this area Communities are going to have to identify dedicated sources of revenue for stormwater and to be more intentional about matching revenue generation with capital needs as the future of the North Carolina stormwater landscape develops
The Environmental Finance Center at UNC-Chapel Hill 9
This is the third consecutive fiscal year and the fifth year overall in which the EFC has published the North Carolina Stormwater Fees and Fee Structures Survey The EFC has completed surveys in 2009-10 2011-12 2016-17 2017-18 and 2018-19 There have been 44 stormwater fee structures which have been included in all five of the surveys Eight of the 44 utilities (182 percent) have not raised their fees since we began collecting data and only one utility has raised fees in every year that we have surveyed
Of the 36 utilities that have raised fees at least once since 2010 eight have raised them at a rate slower than the CPI inflation rate5 of 152 percent since 2010 Sixteen of the 44 fee structures (364 percent) surveyed have residential fees at 3000 square feet that when adjusted for inflation are lower today than in 2010
What these trends represent from a fee setting standpoint is that unlike water and wastewater rates (where rates vary according to the costs identified in a capital improvement plan) most stormwater spending in North Carolina is based primarily on what is feasible with the revenue generated from the existing fee In other words utilities are not necessarily examining capital needs and basing stormwater utility fees on those needs which is why fees are not growing each year in the survey data
There are two stormwater utilities in the state that are charging higher fees to cover some infrastructure needs as well as basic costs including administration planning and operations Additionally some communities like Raleigh and Charlotte have additional stormwater revenue that is being used to do cost-sharebuyout programs which help to fund distributed infrastructure on private property That being said past EFC survey work identifies that most stormwater utilities are using fee revenues to cover only basic costs The EFC is putting together future survey questions geared toward stormwater fee setting and management which will hopefully help identify strategies utilities are using in attempt to match fees more closely to capital needs
2019 North Carolina Stormwater Fees Update Webinar and Poll In March 2019 the EFC conducted a webinar providing an update on North Carolina stormwater fees that was attended by many if not most of the stormwater utilities across the state As part of the webinar the EFC conducted polling questions to better understand the composition interests and needs of the group of webinar attendees The results of the initial survey questions will be used to develop a more in depth survey to be distributed across the state The webinar polling results found that stormwater capital expenditures are low but expected to increase over the next five years There is also moderate interest in funding stormwater
5 Ibid
10 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
capital expenditures with debt in the future as 46 percent of respondents indicated that their utility may borrow money for capital expenses in the next 5 years This is notable as just 11 percent of utilities indicated that they currently fund the majority of capital expenditures with debt Moreover utilities are experimenting with innovative funding and incentive programs as 61 percent of utilities indicated the possibility that they will implement or modify a fee credit program (a fee structure that incentivizes investments on private property by lowering fees) in the future and 57 percent of utilities indicated the possibility of implementing or modifying a cost share program similar to what Raleigh has done
Responses to the webinar polling are shown below
The Environmental Finance Center at UNC-Chapel Hill 11
12 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
The Environmental Finance Center at UNC-Chapel Hill 13
The Future of the Stormwater Finance LandscapeThere are future opportunities and inevitable changes that will have to be made to improve the finance and management of stormwater in North Carolina As is evidenced by the survey results above almost half of participants indicated that they were highly unlikely to utilize debt to finance stormwater infrastructure needs in the next 5 years Debt financing for stormwater infrastructure however has great potential and is an underutilized financing mechanism It is also clear from the EFC rate data for stormwater utilities across the state the revenue generation is far from matching up with the capital needs identified in other survey work Additionally there are many communities with stormwater challenges that do
14 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
not have stormwater utilities or other streams of sufficient revenue for this purpose Such communities will have to identify a mechanism to pay for stormwater needs particularly in places facing drastic increases in water quality impacts of stormwater tightening and enforcement of federal and state regulations and growing concerns about flood mitigation The potential for debt financing existsmdashhowever underutilizedmdashand provides the option for low-interest finance that may benefit communities going forward
Even when utilized however debt financing will still not provide enough revenue to address stormwater management needs going forward without additional sources of dedicated revenue to pay back loans As a simple starting point for stormwater debt capacity the EFC used current stormwater operating revenue totals in 2017 as estimated by the data the EFC has collected and estimated how much debt could be supported at a 2 percent interest rate over a 20 year term For example if we assume that 25 percent of existing operating revenues could be used for debt communities statewide could raise $930 million in the next few years This falls significantly short of current projected needs
Other parts of the country face similar challenges For example in 2018 Los Angeles County voters approved by referendum a county-wide special parcel tax of 25 cents per square foot of impervious surface in order to fund the Safe Clean Water Program The Safe Clean Water Program includes senior citizen exemptions and will include a system of tradeable credits for reductions in or treatment of stormwater pollution This special parcel tax is expected to raise more than $300 million annually for stormwater management Other areas are experimenting with other approaches but most are consistently founded on mechanisms that generate significant new sources of revenue
Without that type of commitment and creativity it is difficult to imagine how significant progress can be made in this area Communities are going to have to identify dedicated sources of revenue for stormwater and to be more intentional about matching revenue generation with capital needs as the future of the North Carolina stormwater landscape develops
10 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
capital expenditures with debt in the future as 46 percent of respondents indicated that their utility may borrow money for capital expenses in the next 5 years This is notable as just 11 percent of utilities indicated that they currently fund the majority of capital expenditures with debt Moreover utilities are experimenting with innovative funding and incentive programs as 61 percent of utilities indicated the possibility that they will implement or modify a fee credit program (a fee structure that incentivizes investments on private property by lowering fees) in the future and 57 percent of utilities indicated the possibility of implementing or modifying a cost share program similar to what Raleigh has done
Responses to the webinar polling are shown below
The Environmental Finance Center at UNC-Chapel Hill 11
12 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
The Environmental Finance Center at UNC-Chapel Hill 13
The Future of the Stormwater Finance LandscapeThere are future opportunities and inevitable changes that will have to be made to improve the finance and management of stormwater in North Carolina As is evidenced by the survey results above almost half of participants indicated that they were highly unlikely to utilize debt to finance stormwater infrastructure needs in the next 5 years Debt financing for stormwater infrastructure however has great potential and is an underutilized financing mechanism It is also clear from the EFC rate data for stormwater utilities across the state the revenue generation is far from matching up with the capital needs identified in other survey work Additionally there are many communities with stormwater challenges that do
14 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
not have stormwater utilities or other streams of sufficient revenue for this purpose Such communities will have to identify a mechanism to pay for stormwater needs particularly in places facing drastic increases in water quality impacts of stormwater tightening and enforcement of federal and state regulations and growing concerns about flood mitigation The potential for debt financing existsmdashhowever underutilizedmdashand provides the option for low-interest finance that may benefit communities going forward
Even when utilized however debt financing will still not provide enough revenue to address stormwater management needs going forward without additional sources of dedicated revenue to pay back loans As a simple starting point for stormwater debt capacity the EFC used current stormwater operating revenue totals in 2017 as estimated by the data the EFC has collected and estimated how much debt could be supported at a 2 percent interest rate over a 20 year term For example if we assume that 25 percent of existing operating revenues could be used for debt communities statewide could raise $930 million in the next few years This falls significantly short of current projected needs
Other parts of the country face similar challenges For example in 2018 Los Angeles County voters approved by referendum a county-wide special parcel tax of 25 cents per square foot of impervious surface in order to fund the Safe Clean Water Program The Safe Clean Water Program includes senior citizen exemptions and will include a system of tradeable credits for reductions in or treatment of stormwater pollution This special parcel tax is expected to raise more than $300 million annually for stormwater management Other areas are experimenting with other approaches but most are consistently founded on mechanisms that generate significant new sources of revenue
Without that type of commitment and creativity it is difficult to imagine how significant progress can be made in this area Communities are going to have to identify dedicated sources of revenue for stormwater and to be more intentional about matching revenue generation with capital needs as the future of the North Carolina stormwater landscape develops
The Environmental Finance Center at UNC-Chapel Hill 11
12 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
The Environmental Finance Center at UNC-Chapel Hill 13
The Future of the Stormwater Finance LandscapeThere are future opportunities and inevitable changes that will have to be made to improve the finance and management of stormwater in North Carolina As is evidenced by the survey results above almost half of participants indicated that they were highly unlikely to utilize debt to finance stormwater infrastructure needs in the next 5 years Debt financing for stormwater infrastructure however has great potential and is an underutilized financing mechanism It is also clear from the EFC rate data for stormwater utilities across the state the revenue generation is far from matching up with the capital needs identified in other survey work Additionally there are many communities with stormwater challenges that do
14 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
not have stormwater utilities or other streams of sufficient revenue for this purpose Such communities will have to identify a mechanism to pay for stormwater needs particularly in places facing drastic increases in water quality impacts of stormwater tightening and enforcement of federal and state regulations and growing concerns about flood mitigation The potential for debt financing existsmdashhowever underutilizedmdashand provides the option for low-interest finance that may benefit communities going forward
Even when utilized however debt financing will still not provide enough revenue to address stormwater management needs going forward without additional sources of dedicated revenue to pay back loans As a simple starting point for stormwater debt capacity the EFC used current stormwater operating revenue totals in 2017 as estimated by the data the EFC has collected and estimated how much debt could be supported at a 2 percent interest rate over a 20 year term For example if we assume that 25 percent of existing operating revenues could be used for debt communities statewide could raise $930 million in the next few years This falls significantly short of current projected needs
Other parts of the country face similar challenges For example in 2018 Los Angeles County voters approved by referendum a county-wide special parcel tax of 25 cents per square foot of impervious surface in order to fund the Safe Clean Water Program The Safe Clean Water Program includes senior citizen exemptions and will include a system of tradeable credits for reductions in or treatment of stormwater pollution This special parcel tax is expected to raise more than $300 million annually for stormwater management Other areas are experimenting with other approaches but most are consistently founded on mechanisms that generate significant new sources of revenue
Without that type of commitment and creativity it is difficult to imagine how significant progress can be made in this area Communities are going to have to identify dedicated sources of revenue for stormwater and to be more intentional about matching revenue generation with capital needs as the future of the North Carolina stormwater landscape develops
12 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
The Environmental Finance Center at UNC-Chapel Hill 13
The Future of the Stormwater Finance LandscapeThere are future opportunities and inevitable changes that will have to be made to improve the finance and management of stormwater in North Carolina As is evidenced by the survey results above almost half of participants indicated that they were highly unlikely to utilize debt to finance stormwater infrastructure needs in the next 5 years Debt financing for stormwater infrastructure however has great potential and is an underutilized financing mechanism It is also clear from the EFC rate data for stormwater utilities across the state the revenue generation is far from matching up with the capital needs identified in other survey work Additionally there are many communities with stormwater challenges that do
14 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
not have stormwater utilities or other streams of sufficient revenue for this purpose Such communities will have to identify a mechanism to pay for stormwater needs particularly in places facing drastic increases in water quality impacts of stormwater tightening and enforcement of federal and state regulations and growing concerns about flood mitigation The potential for debt financing existsmdashhowever underutilizedmdashand provides the option for low-interest finance that may benefit communities going forward
Even when utilized however debt financing will still not provide enough revenue to address stormwater management needs going forward without additional sources of dedicated revenue to pay back loans As a simple starting point for stormwater debt capacity the EFC used current stormwater operating revenue totals in 2017 as estimated by the data the EFC has collected and estimated how much debt could be supported at a 2 percent interest rate over a 20 year term For example if we assume that 25 percent of existing operating revenues could be used for debt communities statewide could raise $930 million in the next few years This falls significantly short of current projected needs
Other parts of the country face similar challenges For example in 2018 Los Angeles County voters approved by referendum a county-wide special parcel tax of 25 cents per square foot of impervious surface in order to fund the Safe Clean Water Program The Safe Clean Water Program includes senior citizen exemptions and will include a system of tradeable credits for reductions in or treatment of stormwater pollution This special parcel tax is expected to raise more than $300 million annually for stormwater management Other areas are experimenting with other approaches but most are consistently founded on mechanisms that generate significant new sources of revenue
Without that type of commitment and creativity it is difficult to imagine how significant progress can be made in this area Communities are going to have to identify dedicated sources of revenue for stormwater and to be more intentional about matching revenue generation with capital needs as the future of the North Carolina stormwater landscape develops
The Environmental Finance Center at UNC-Chapel Hill 13
The Future of the Stormwater Finance LandscapeThere are future opportunities and inevitable changes that will have to be made to improve the finance and management of stormwater in North Carolina As is evidenced by the survey results above almost half of participants indicated that they were highly unlikely to utilize debt to finance stormwater infrastructure needs in the next 5 years Debt financing for stormwater infrastructure however has great potential and is an underutilized financing mechanism It is also clear from the EFC rate data for stormwater utilities across the state the revenue generation is far from matching up with the capital needs identified in other survey work Additionally there are many communities with stormwater challenges that do
14 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
not have stormwater utilities or other streams of sufficient revenue for this purpose Such communities will have to identify a mechanism to pay for stormwater needs particularly in places facing drastic increases in water quality impacts of stormwater tightening and enforcement of federal and state regulations and growing concerns about flood mitigation The potential for debt financing existsmdashhowever underutilizedmdashand provides the option for low-interest finance that may benefit communities going forward
Even when utilized however debt financing will still not provide enough revenue to address stormwater management needs going forward without additional sources of dedicated revenue to pay back loans As a simple starting point for stormwater debt capacity the EFC used current stormwater operating revenue totals in 2017 as estimated by the data the EFC has collected and estimated how much debt could be supported at a 2 percent interest rate over a 20 year term For example if we assume that 25 percent of existing operating revenues could be used for debt communities statewide could raise $930 million in the next few years This falls significantly short of current projected needs
Other parts of the country face similar challenges For example in 2018 Los Angeles County voters approved by referendum a county-wide special parcel tax of 25 cents per square foot of impervious surface in order to fund the Safe Clean Water Program The Safe Clean Water Program includes senior citizen exemptions and will include a system of tradeable credits for reductions in or treatment of stormwater pollution This special parcel tax is expected to raise more than $300 million annually for stormwater management Other areas are experimenting with other approaches but most are consistently founded on mechanisms that generate significant new sources of revenue
Without that type of commitment and creativity it is difficult to imagine how significant progress can be made in this area Communities are going to have to identify dedicated sources of revenue for stormwater and to be more intentional about matching revenue generation with capital needs as the future of the North Carolina stormwater landscape develops
14 The Stormwater Finance Landscape Where Wersquove Come from and Where Wersquove Yet to Go
not have stormwater utilities or other streams of sufficient revenue for this purpose Such communities will have to identify a mechanism to pay for stormwater needs particularly in places facing drastic increases in water quality impacts of stormwater tightening and enforcement of federal and state regulations and growing concerns about flood mitigation The potential for debt financing existsmdashhowever underutilizedmdashand provides the option for low-interest finance that may benefit communities going forward
Even when utilized however debt financing will still not provide enough revenue to address stormwater management needs going forward without additional sources of dedicated revenue to pay back loans As a simple starting point for stormwater debt capacity the EFC used current stormwater operating revenue totals in 2017 as estimated by the data the EFC has collected and estimated how much debt could be supported at a 2 percent interest rate over a 20 year term For example if we assume that 25 percent of existing operating revenues could be used for debt communities statewide could raise $930 million in the next few years This falls significantly short of current projected needs
Other parts of the country face similar challenges For example in 2018 Los Angeles County voters approved by referendum a county-wide special parcel tax of 25 cents per square foot of impervious surface in order to fund the Safe Clean Water Program The Safe Clean Water Program includes senior citizen exemptions and will include a system of tradeable credits for reductions in or treatment of stormwater pollution This special parcel tax is expected to raise more than $300 million annually for stormwater management Other areas are experimenting with other approaches but most are consistently founded on mechanisms that generate significant new sources of revenue
Without that type of commitment and creativity it is difficult to imagine how significant progress can be made in this area Communities are going to have to identify dedicated sources of revenue for stormwater and to be more intentional about matching revenue generation with capital needs as the future of the North Carolina stormwater landscape develops