6.2 User Fees as a Collection Device

The user fee has been the most frequently used methodology for the collection of stormwater charges among municipal governments. The user fee is typically collected through the use of an existing utility bill, and for this reason, has been commonly used by municipalities where stormwater utilities have been implemented. The underlying reason for utilizing this method is that the typical municipality has one or more existing utility systems (e.g., water, sewer, solid waste) that reach the majority of customers within its political boundaries. This section presents a discussion of the revenue collection methods that can be used when employing the user fee; the advantages and disadvantages associated with each method; and enforcement mechanisms available to a jurisdiction to collect revenues under these options.

6.2.1 Methods of Collection - Utility or Separate Bill

One of the initial questions faced by stormwater utilities involves what method of fee collection will sufficiently provide the municipality with the means for revenue collection. The answer to this question is not identical for each municipality, and will vary depending on each individual government's current method for collecting fees associated with enterprise funds.

Utility Bill

Many municipalities have chosen to collect stormwater fees through the use of an existing utility bill, such as water, sewer, solid waste, or other types of charges. Results of the FASU 1997 survey indicated that approximately 81% of the stormwater utilities surveyed collect stormwater fees via this method. City governments primarily use the utility bill method whereas county governments use the uniform collection method (see Section 6.3.1). The utility bill method is beneficial when service areas amongst the varying utilities overlap and a single collection mechanism can be utilized to administer multiple charges. Additionally, collection of the fee through an existing utility can be fairly straightforward and cost effective when compared to the effort required for fee collection on a separate bill. Using an existing billing system allows flexibility with respect to including the additional charge associated with stormwater services.

Use of an existing utility bill also allows the stormwater utility to reach the majority of customers found within the service area. Although this method may not reach the entire customer base, other methods for the non-utility customer base can be considered for implementation. One method involves adding the non-utility customers to the utility billing system whereby the customer is only billed for stormwater services. In doing so, the utility may want to consider a different billing cycle within the utility for non-utility customers and/or the utilization of a different collection/enforcement mechanism, e.g., a lien instead of discontinuation of service. Other options available for non-utility customers include the use of a different collection method or simply not including those customers as part of the stormwater utility.

A final advantage of using an existing utility bill is that the payments received for a utility bill can be first applied to the stormwater fee, or equally to all charges included on the utility bill. In doing so, a partial payment submitted by a user, or failure to pay the stormwater charge, allows the municipality to implement enforcement action via the termination of other utility services, e.g., water, sewer, or electrical service.

Separate Bill

There are no real distinct advantages with using a separate bill. However, there are two certain cases where a separate bill may be useful for the purpose of collection for a stormwater utility. One involves using a separate bill as an interim mechanism for fee collection while waiting to meet the necessary statutory requirements to utilize the non-ad valorem assessment method. The second case involves using a separate bill as a supplemental measure for billing those customers that cannot be reached with the standard utility bill or for billing parcels that do not have utility service.

6.2.2 Collection Methodologies - Pros and Cons

It should be noted that, while the two collection strategies are quite distinct from each other, they can be deployed in the same community simultaneously (sometimes called a "bifurcated" approach). For example, a county might elect to impose a fee for stormwater services in those areas where a county water and/or sewer utility already exists, and to impose assessments in the remaining areas outside the reach of county owned water and sewer systems. In a similar vein, a city might elect to impose a fee on developed land, and to collect an assessment on undeveloped parcels (for which city water and sewer accounts do not exist). Finally, either might elect to impose a fee on developed land, and to collect an assessment on undeveloped parcels (for which city water and sewer accounts do not exist). Finally, either might elect to impose a fee on all properties and place delinquencies (only) on the tax bill as an assessment the following year.

As previously stated, there are no real distinct advantages with using a separate utility bill for the purpose of collecting revenues associated with stormwater services. Therefore, this discussion focuses primarily on the pros and cons of utilizing an existing utility billing system for fee collection.

Advantages

The advantages and disadvantages of using an existing utility billing system for fee collection have been summarized in Table 6-1. The single most cited advantage of using an existing utility system is cost effectiveness since no new billing system needs to be developed. The second most cited advantage is the strong and immediate enforcement mechanism that is inherent with the utility billing system, whereby discontinuation of service may be possible if full payment for all utility services is not rendered. Another advantage of this methodology is the flexibility and control a billing system affords. For example, it allows changes to rates, and even the rate structure, at any time with the only requirement being an action by the local governing body.

There are no special noticing requirements for using an existing utility or separate bill, with the exception of local government requirements related to the passage of the necessary ordinances and/or resolutions. Typically this involves one or two public hearings. Additionally, there are no preset administrative charges associated with this method. Administrative charges are subject only to the practices of the local government relative to enterprise funds/activities.

Disadvantages

The single most noted disadvantage associated with using a utility billing system lies with the fact that parcel characteristic data typically does not match up with data found on a utility's existing account database. For this reason, linking the corresponding databases can be an arduous task. Other disadvantages are noted in Table 6-1.

Table 6-1

Advantages and Disadvantages with Using A Utility Billing System for Fee Collection

6.2.3 Enforcement

Two distinct methods are used by government to enforce the payment of stormwater charges where a utility billing system is used. These methods, in order of preference, are presented in Table 6-2 below.

Table 6-2

Methods Used for Enforcement of Utility Charge

^a Based on FASU 1997 Stormwater Utility Survey (53 utilities responded)

^b These methods apply where non-ad valorem assessments are used for the purpose of collecting revenues

The primary method of enforcement associated with the use of existing utility billing systems is the discontinuation of service. This enforcement mechanism can be easily, quickly, and cost- effectively administered. It is very effective for most active utility accounts, since the discontinuation of water or electric service (typically) is unacceptable to most customers. This methodology is not as effective for inactive accounts (uninhabited properties, seasonal residents, or rental properties), and is very ineffective for vacant undeveloped properties. For this reason, the jurisdiction should consider writing an ordinance, which requires that the property owner receive the bill. This allows the jurisdiction to utilize a lien or foreclosure method as a more effective means of enforcement in these situations.

Liens can also be used with an existing utility billing system. Liens can be used as a second wall of defense when discontinuation of service is either unsuccessful or not practical (as in the case with vacant undeveloped property). Although effective, the use of liens as an enforcement mechanism can be both time consuming and costly and are consequently avoided whenever possible.

Most utilities will also attempt to utilize warning letters or notices of pending action in order to solicit payment from customers before having to use one or more of the measures discussed above.