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1.6 FINANCIAL CONSIDERATIONS AND INSTITUTIONAL ISSUES Development and implementation of a functional stormwater management program requires more than a concentrated Public Works effort. It also involves many different aspects of a community's governmental structure, and impacts financial operations and existing institutional systems. 1.6.1 Financial Considerations The financial considerations associated with developing and implementing a stormwater utility are an area that require careful attention. Given a utility's ability to generate operating and capital investment funding, it is important to address the basic financial considerations that will establish the feasibility of the utility within a given community. Data Acquisition/Development Costs Cost of data acquisition and/or development is one of the most important considerations in selecting a preferred stormwater service charge rate methodology. Two types of data are needed for a stormwater utility: (1) information on the appropriate physical parameters on each parcel of property subject to the billing, commonly referred to as the master account file, and (2) information which allows the bill to be delivered to the proper party and receipts to be properly accounted for which is defined as the billing file. Many cities and counties have selected
their preferred stormwater rate methodology primarily because of the
ready availability of data in their files or their ability to deliver
a bill efficiently through one mechanism or another. How that can best
be accomplished is closely related to the suitability of various existing
databases and data management systems.
A more detailed discussion of billing alternatives, methods for computing
user fees, Master Account File data collection and database development
concerns is presented in Chapter
5 of this manual.
Utility Rate Structures
A matrix of funding methods exists which encourages consideration of
many combinations. A community should not examine the relative benefits
of four or five specific service charge rate structures, but should
instead define a total funding concept consistent with its perspective
of an appropriate rate structure. The umbrella of a service charge rate
structure provides excellent flexibility for incorporating other funding
methods, which fit the context of the program and recognize the community's
changing needs. It is quite common for full implementation of the various
funding mechanisms that a community may elect to use to take five or
more years that is consistent with the transitional development and
evolution of the community's stormwater management program.
Most Florida communities find that service charges will be the primary
funding source for their stormwater management program. Some form of
service charge is the only option that has a practical and realistic
prospect of meeting the combined capital and operating revenue needs
of most communities. The five service charge rate concepts that are
commonly used include:
Stormwater rate structures employing impervious area as the sole parameter
for calculating charges have been used for nearly 15 years and are technically
well accepted. Most Florida communities implementing stormwater service
charges have used the impervious area rate methodology because it is
directly related to runoff volumes and chronic flood control problems.
Analysis of stormwater quality data gathered during the National Urban
Runoff Program (NURP) suggests that impervious area is also the most
dominant factor in pollutant loadings present in stormwater, which directly
relates to a community's water quality objectives. Rate concepts that
broaden the funding base by imposing service charges on undeveloped
as well as developed lands are carefully examined because that would
add to the rate base.
A number of modifying factors can be applied to the basic rate structure
options to customize them to meet a community's specific needs. The
primary objectives of using factors which modify a basic stormwater
service charge rate structure are to: (1) improve the overall equity
of the financing mix; (2) improve the community's operational and regulatory
programs more quickly by generating additional revenue; and (3) reduce
implementation and upkeep costs. Modifying factors that might be appropriate
in Florida communities include:
The purpose of these modifying factors
is not to simply generate revenue, as the additional revenue that is
created is often incidental to the greater regulatory role that the
stormwater management program will play in the future through controls
on land use, site discharge, and private maintenance actions. In fact,
a credit for on?site detention reduces rather than increases revenue
capacity. The advantages gained using these factors must be weighed
against the disadvantages they entail in terms of gathering and maintaining
data.
Secondary Revenue Sources
Florida communities are examining a variety of secondary funding methods,
not directly related to the service charges, as a means of generating
additional charges to certain customers who receive special services
and applying special charges to equalize financial participation among
properties over time. These secondary funding methods would be incorporated
directly into a service charge rate structure rather than established
separately. Examples of secondary funding methods include:
The ease of incorporating secondary funding methods with each basic
rate structure design must be examined carefully because these funding
methods are a viable means of increasing total revenue.
Timing
Timing is critically important. Communities that are considering the
development of a stormwater utility often desire to establish alternative
funding for their stormwater management programs within a one- or two-year
timeframe. However, the immediate emphasis on additional funding must
be considered in the context of the community's long?term stormwater
management needs. The scope of stormwater operations and level of service
in many Florida communities need to change significantly in order to
correct existing system-wide problems and prevent problems, and that
funding capability must change concurrently.
Stormwater management in Florida is evolving into a major governmental
responsibility. Increased operations and maintenance, major capital
improvements, and more regulatory measures are demanded by citizens
and are being mandated by Federal regulatory programs, which are focusing
on stormwater quality. To the extent possible, the community should
seek means of solving its immediate funding dilemma that are consistent
and compatible with its long-term program and funding needs.
Reduced Tax Funding
A community's general tax revenues, in many cases, are simply incapable
of meeting the stormwater needs given the other priorities, which exist.
If the community can successfully identify, adopt, and implement a stormwater
utility service charge rate methodology and other funding methods, which
fit well with the future scope of stormwater management, much greater
efficiency will be attained in the transitional process of developing
a truly comprehensive program. Stormwater managers must recognize that
the existing tax-based funding for stormwater management will, in most
cases, be gradually reduced/eliminated upon the implementation of their
community's stormwater utility.
Long-Term Financial Strategy and Planning
The actual expense of stormwater management is much greater than the
direct costs contained in the community's budget. Responsibility for
various aspects of stormwater management is severely fragmented at the
present time. The funding strategy must allow for this fragmentation
until consolidation can be accomplished, and should be structured so
that the full, comprehensive scope of the future program can be adequately
and fairly funded. Based on this analysis, it is clear that the community
needs to establish a stormwater service charge and/or other methods
of funding which generate sufficient revenue in an equitable and publicly
acceptable manner, and needs to do so as soon as possible.
Interfund Loans
Most Florida communities operate one or more conventional enterprise
utilities that have accumulated reserves as required for satisfying
bond requirements and providing for long-term replacement of their infrastructure.
Depending upon the size of these reserves and planned/scheduled replacement
and repair projects, some of these funds can potentially be used to
provide initial funding for the development and/or implementation of
the community's stormwater utility. This approach, when used, can substantially
reduce the cost of initial stormwater utility funding, and repayment
of the interfund loan is based upon the revenue stream generated by
the stormwater utility.
Bonding of Capital Projects
Many Florida communities issue bonds for stormwater improvements, as
opposed to using the "pay-as-you-go" approach, in order to
accelerate the construction of capital projects required to resolve
chronic community problems. Revenues generated by a stormwater utility
can be pledged to repay bonds used to provide the funding needed for
the accelerated capital investment in stormwater infrastructure.
1.6.2 Institutional Issues
Development and implementation of a stormwater utility in a community
often changes the manner in which stormwater services are delivered,
and which departments/divisions within the governmental structure are
responsible for providing the services. These changes translate into
shifts in manpower levels, annual operating budgets and, on occasion,
the internal reorganization of the governmental units.
Operational Staffing and Budgets
Most Florida communities have implemented their stormwater utilities
to improve their ability to provide existing services and, in numerous
cases, to provide new stormwater management services to the citizens.
Generally this improvement requires increases in both staff and budget
for administrative, planning, engineering, regulatory and operation
and maintenance activities. While some communities have utilized consultants
to provide specialized services in the areas of planning, stormwater
modeling and the preparation of contract documents for capital improvement
projects in order to prevent the expansion of staff, this practice still
requires additional budget to cover the consultants' contracts.
CIP Budgets
A significant component of virtually every Florida stormwater utility
is funding of the construction activities -- capital projects for new
facilities, repair/rehabilitation of existing facilities or major maintenance
to maintain capacity -- to remedy chronic problems within the community.
Implementation of a stormwater utility usually means a substantial,
long-term increase in the community's stormwater CIP budgets.
Organization
The delivery of services in many Florida communities is fragmented
with different services being provided by different departments. As
an example, new stormwater management facilities are designed by the
engineering department, permitted through a different department, constructed
under the management of the capital projects department and, upon completion,
turned over to the roads department for maintenance.
Since virtually all of these activities are funded from the same revenue
stream, the stormwater utility, some communities have reorganized their
departments so that all of these functions are consolidated in a stormwater
management department that is responsible for all of the functions that
are paid for through stormwater utility revenues: administration, planning
and engineering, regulation and enforcement, and operations and maintenance
activities. The resulting reorganization clearly shifts power within
the governmental structure and can create internal supporters and critics
based on who is gaining and losing staff, budget and prestige.
Internal Consensus Building
Development of a consensus between the various departments that provide
stormwater management services in a community is an important consideration
for the successful development and implementation of a stormwater utility.
Any process that shifts staff, budget and prestige between managers
and departments, and especially those processes that require internal
reorganization, are tenuous and require careful attention to educating
all levels of staff, to directing and focusing managers who are increasing
their department's size, budget and responsibilities and, especially,
to placating managers who are losing staff and resources.
Failure to address these issues can produce very vocal critics at all
levels of the staff who, at a minimum, lower morale and increase the
length and cost of successful reorganization and improvements in the
delivery of services. In the worst case, the vocal internal critic can
sabotage the process and cause such internal turmoil that the entire
stormwater utility is undermined and the implementation process ends
in failure.
Finding a Champion
Perhaps the best omen of successful stormwater utility implementation is the emergence of a champion who, through his/her enthusiasm, preparation and protracted effort, facilitates the development of public, political and institutional support of the stormwater utility. A champion can be a mayor, a respected member of the city commission or the board of county commissioners, a senior manager, or an influential and determined community activist who wants to solve the community's chronic stormwater problems and, perhaps, leave a legacy for their grandchildren. Identification of one or more champions at an early stage of the stormwater utility development process, and the cultivation of the champion(s), is perhaps one of the most important initial activities that a community can undertake toward long-term success of their utility.
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