STORM WATER PUBLIC UTILITIES GET INCREASING ATTENTION

Two years ago, I discussed the possible formation of storm water public utilities to enable municipalities to provide comprehensive storm water management to achieve regulatory compliance ("Is A Storm Water Utility In Your Future?", December 27, 2010).

Now, it seems that more and more municipalities are forming such utilities to construct, operate and maintain storm water disposal systems. For, example, it is reported that in South Dakota, Sioux Falls, Brookings, Aberdeen, Pierre and Vermillion have such utilities and Rapid City is considering one. A typical feature of a storm water public utility is a rate structure by which property owners are charged in accordance with their estimated contribution to runoff, and both revenues and expenses are separately accounted for using enterprise accounting.

A recent decision of the Maine Supreme Judicial Court is instructive as to the propriety of storm water public utility ratemaking. (City of Lewiston v. Gladu, 2012 ME 42 (2012)). The Court held that the rate charged was a fee for service, not a tax.

The Court found that there was a link between the rates charged and the amount of impact imposed on the storm water management system. The fee was based on the amount of impervious surface of each property. Fee reductions were allowed for certain conditions, including where a property has a storm water system that does not impact the municipal system, or where the property is undeveloped.

The Court noted that all of the utility revenues were to cover only the costs of regulating storm water runoff, maintaining the storm water infrastructure and managing the utility. In other words, revenues did not cross-subsidize other municipal functions.

The Court also found that the utility provided a benefit to property owners. "The assessment applies only to developed property, the properties receive the special benefit of having their stormwater managed in an effort to comply with state and federal laws, and the assessment is properly based on the horizontal impervious surface area. Viewing this factor in light of the recent trend toward upholding fees that 'confer intangible benefits on both those who are assessed and those who are not'...it weighs in favor of upholding the stormwater fee." (pp.11-12)

The Court cited Tukwila School District No. 406 v. City of Tukwila, 167 P.3rd 1167 (Ct. App. WA 2007), which upheld a storm water utility where the rates were limited to protecting property owners and local water sources from runoff, the revenues were segregated and used only for those purposes, and the fees were approximately proportional to the amount of impervious surface of the properties.

It would seem that the formation of a storm water public utility is particularly attractive in view of the ever-increasing environmental regulatory climate for storm water control and the every-decreasing municipal revenue climate in today's economy.