GUIDANCE FOR 

MUNICIPAL 

STORMWATER FUNDING 

Prepared by National Association of Flood and Stormwater 

Management Agencies 

Under Grant Provided by Environmental Protection Agency 

January 2006 

 
ACKNOWLEDGEMENTS 

This project was funded by a grant from the United States Environmental 

Protection Agency (USEPA) to the National Association of Flood and Stormwater 

Management Agencies (NAFSMA). The project was funded under the USEPA 

Federal Water Quality Cooperative Agreements Program in the Office of Water. 

Susan Gilson, Executive Director of NAFSMA was the project manager. 

Consultants for the project were: 

David Burchmore of Squire, Sanders and Dempsey L.L.P. 

Hector Cyre of Water Resource Associates, Inc. 

Doug Harrison 

Andrew Reese of AMEC Earth & Environmental, Inc. 

Scott Tucker. 

Scott Tucker and Doug Harrison were authors of Chapter 1 on Background and 

Introduction, Hector Cyre of Chapter 2 on Sources of Funding, David Burchmore 

of Chapter 3 on Legal Considerations, and Andrew Reese of Chapter 4 on 

Implementing User-Fee Based Funding. Hector Cyre contributed the case 

studies found in the Appendix. Doug Harrison and Scott Tucker provided overall 

coordination and editing for the project. 

 i 
TABLE OF CONTENTS 

 Page

Acknowledgements i 

 

Executive Summary ES-1

 Sources of Funding ES-1 

 Legal Considerations ES-2 

 Implementing User-Fee Based Funding ES-4 

 Case Studies ES-5

 

Chapter 1, Background and Introduction 1-1 

 What Is Municipal Stormwater 1-1 

Historical Development of Stormwater Systems 1-2 

 New Paradigm 1-2

 Legislative Perspective 1-5 

 Stormwater As A Service 1-6 

Issues and Challenges for Local Governments 1-7 

 

Chapter 2, Sources of Funding 2-1 

 Funding Strategies 2-1 

 Money, Revenue, and Resources 2-1 

 Expensed Versus Debt Funding 2-2 

Characteristics of Successful Funding Strategies 2-2 

 A Business Plan Approach Is Based on Strategic Objectives 2-3 

 Effective Stormwater Business Plans Identify Linkages 

 And Dependencies 2-3 

 Community Expectations Are Represented in the 

 Business Plan 2-4

 Effective Programs Respond to Change 2-4 

 Service Fee Rates Are Cost-Based 2-4 

 Resources Are Dedicated and Stable 2-4 

 Trends in Funding Practices 2-5 

 Increasing Complexity 2-5 

 Blended Funding 2-6 

 Multi-jurisdictional Funding 2-6 

 Cost-sharing With Other Public Programs 2-7 

 Broader Private Sector Participation 2-8 

 Increasing Influence of Technology and Data 2-8 

 Funding Methods and Mechanisms 2-9 

 Local Governments’ Funding Authority 2-9 

 Funding Methods and Mechanisms 2-10 

 General Revenue Appropriations 2-10 

 Stormwater User (Service) Fees 2-12 

 ii 
Plan Review, Development Inspection and 

Other Special Fees 2-14 

 Special Assessments 2-14 

 Bonding for Capital Improvements 2-15 

 In-lieu of Construction Fees 2-16 

 Capitalization Recovery Fees 2-18 

 Impact Fees 2-19

 Developer Extension/Latecomer Fees 2-21 

 Federal and State Funding 2-22 

Service Fee and Assessment Design Considerations 2-22 

 Legality 2-22 

 Equity 2-23

 Technical Foundations 2-24 

 Origin of Costs 2-25

 Revenue Sufficiency 2-27 

 Flexibility 2-27 

 Balance of Rates with Level of Service 2-27 

 Data Requirements 2-28 

 Compatibility with Data Processing Systems 2-29 

 Consistency with Other Local Funding and Rate Policies 2-30 

 Revenue Stability and Sensitivity 2-30 

Service Fee Rate and Assessment Methodologies 2-31 

 Rate Design 2-31

 Service Fees 2-31

 Assessments 2-32

 Uniform and Tiered Charges 2-32 

 Service and Equivalency Units 2-33 

 Classification and Grouping of Like Customers 2-34 

 Service Fee Credits 2-34 

 Example Stormwater Rate Methodologies 2-36 

 Impervious Area 2-36 

 Impervious Area and Gross Area 2-38 

Impervious Area and Percentage of 

 Impervious Coverage 2-41 

Gross Area and Intensity of Development 2-45 

 

Chapter 3, Legal Considerations 3-1 

 Overview 3-1

 Common Themes 3-4 

 Tax vs. Fee 3-4

 Found Not to Be a Tax 3-5 

 Found to Be a Tax 3-7 

 Voluntary Service and “Opt-Out” Provisions 3-8 

 Fee vs. Special Assessment 3-10 

 Related to Cost of Services 3-11 

 Properties Benefited 3-12 

 iii 
 Summary and Conclusion 3-17 

 Cases Cited 3-18

 

Chapter 4, Implementing User-Fee Based Funding 4-1 

 Overview 4-1

 Forces Driving Action 4-2 

The Stormwater Utility, Program Concept and Due Diligence 4-3 

 Utility Program Concept 4-3 

 Due Diligence 4-4 

Creating Momentum and a Process for Program Action 4-5 

 Understanding Problems 4-5 

 Vision for the Future 4-6 

 Bringing About Action 4-7 

 Process Framework 4-7 

 Process Framework, Quick Concept Study 4-8 

 Process Framework, Feasibility Study 4-9 

 Process Framework, Utility Implementation 4-11 

 The Public Track 4-11 

 The Program Track 4-13 

 The Finance Track 4-14 

 The Database Track 4-15 

 Policy Issues 4-17

 Schedule 4-19 

 

Appendix, Example Stormwater Utility Programs A-1 

 City of Bellevue, Washington A-1 

 Keynotes A-1

 Community Profile A-2

 Formation Process A-3 

 Service Area A-3

 Role and Program A-3 

 Governance Structure A-5 

 Organization and Staffing A-5 

 Funding A-5 

 Inter-governmental Cooperation A-6 

 Public Participation A-6 

City of Charlotte/Mecklenburg County, North Carolina A-7 

 Keynotes A-7

 Community Profile A-9

 Formation Process A-10 

 Service Area A-11

 Role and Program A-12 

 Governance Structure A-13 

 Organization and Staffing A-14 

 Funding A-14 

 Inter-governmental Cooperation A-15 

 Public Participation A-16 

 City of Tulsa, Oklahoma A-18 

 iv 
 Inter-governmental Cooperation A-15 

 Public Participation A-16 

 City of Tulsa, Oklahoma A-18 

 Keynotes A-18

 Community Profile A-19

 Formation Process A-22 

 Service Area A-22

 Role and Program A-23 

 Organization and Staffing A-24 

 Funding A-24 

 Inter-governmental Cooperation A-25 

 Public Participation A-25 

 Louisville/Jefferson County Metropolitan 

 Service District (MSD), Kentucky A-25 

 Keynotes A-25

 Community Profile A-26

 Formation Process A-27 

 Service Area A-27

 Role and Program A-28 

 Governance Structure A-28 

 Organization and Staffing A-28 

 Funding A-28 

 Inter-governmental Cooperation A-29 

 Public Participation A-29 

Sarasota County Stormwater Environmental Utility, Florida A-29 

 Keynotes A-29

 Community Profile A-31

 Formation Process A-31 

 Service Area A-31

 Role and Program A-32 

 Governance Structure A-32 

 Organization and Staffing A-32 

 Funding A-32 

 Inter-governmental Cooperation A-33 

 Public Participation A-34 

Summary of Tables: 

Table 1-1: Major Stormwater Management Functional Centers 1-4 

Table 2-1: Example Schedule of Rates 2-43 

Table 4-1: Building Blocks for a Compelling Case 4-6 

Summary of Figures: 

Figure 4-1: Overall Process Framework 4-8 

Figure 4-2: Feasibility Study Roadmap 4-9 

Figure 4-3: Utility Implementation Approach 4-12 

Figure 4-4: Utility Implementation Schedule 4-20 

 v 
EXECUTIVE SUMMARY 

Municipal stormwater management for local governments has evolved over time 

from an urban flood control function, to a water and resource management 

function, to an environmental protection and regulatory function. All three 

functions now co-exist as responsibilities of local government. This evolution has 

forced changes in how stormwater systems are planned, designed, constructed, 

operated, and financed. More specifically, the stormwater function has evolved 

from a basic capital construction and maintenance program supported primarily 

by local taxes, to a program of integrated water resource management, 

environmental enhancement, and recreational services requiring a multi-faceted 

benefit based finance system. 

The focus of this guidance is to provide a resource to local governments as they 

address contemporary stormwater program financing challenges. The guidance 

includes procedural, legal, and financial considerations in developing viable 

funding approaches. The guidance examines a range of possible approaches to 

paying for stormwater management, but the focus is on guidelines for developing 

service/user/utility fees to support these programs. The terms service fee, user 

fee, and utility fee may be used interchangeably in this guidance. Chapter 2 

addresses various sources of funding. Chapter 3 covers legal considerations,

and implementation of stormwater funding programs is discussed in Chapter 4. 

SOURCES OF FUNDING

“Needs” are the key driver of stormwater programs and funding development. 

Without a well defined stormwater service need, there will not be basic support 

and success will be less likely. When considering how to develop and finance a 

stormwater program it is important to prepare a business plan that identifies 

strategic decisions and guides the program evolution and funding decisions. 

Emerging trends in funding practices include increasing complexity, blended 

funding, multi-jurisdictional funding, cost-sharing with other public programs, 

broader private sector participation, and increasing influence of technology and 

data. 

 ES-1 
Stormwater management has historically been supported by a range of funding 

methods and mechanisms that reflect a mix of federal, state and local programs. 

While the focus of this guidance is on service fees, other stormwater program 

funding mechanisms include general revenue appropriations; plan review, 

development inspection, and special user fees; special assessments; bonding for 

capital improvements; in-lieu of construction fees; capitalization recovery fees; 

impact fees; developer extension/latecomer fees; and federal and state funding 

opportunities such as grants, loans and cooperative programs. 

There are several criteria that are commonly used to evaluate and select 

methods for design of service fee rate structures. They include legality, equity, 

revenue sufficiency, flexibility, balance of rates with level of service, data 

requirements, compatibility with data processing systems, consistency with other 

local funding and rate policies, and revenue stability and sensitivity. The 

fundamental objective of a service fee/utility is attainment of equity. Service fee 

rate methodologies are designed to attain a fair and reasonable apportionment of 

cost of providing services and facilities. 

Design of stormwater service fees must meet general and technical standards. A 

rate structure analysis is performed to determine how costs might be apportioned 

among those who are served in various ways by expenditures for maintenance 

and operations, capital improvements, and support activities. Impervious area, 

gross area, percentage imperviousness, and land use are the parameters most 

frequently used to determine rate structures. Services fees are generally costbased and are designed to reflect the impacts that each property has on 

stormwater service demands. Such costs are primarily a function of the peak 

stormwater runoff rate, the total volume of discharge, and pollutant contributions. 

There are four rate structure concepts or methodologies used as examples in this 

guidance that are typical of those adopted in the more than five hundred 

communities that have established stormwater utilities. These examples base

their fees on impervious area, a combination of impervious area and gross area, 

impervious area and the percentage of imperviousness, and gross property area 

and the intensity of development. 

LEGAL CONSIDERATIONS

The type of funding mechanism selected for a stormwater utility or stormwater 

management program has a variety of legal consequences. Taxes, service fees, 

special assessments, impact fees and other revenue sources can be used, but 

each approach will have different implications in terms of who will pay, what 

procedures must be followed to implement and collect the charge, and how the 

money can be used. If the funding approach is deemed to be a tax, then taxexempt entities such as churches, schools, state agencies and federal 

government facilities will contest their obligation to pay. If a service fee approach 

 ES-2 
is used, the reasonableness of the rate structure and its relationship to the 

service being provided may be challenged. In many states special taxpayer 

approval must be sought. 

The distinctions between the various funding approaches are often blurred. In 

general, a tax is an enforced burden imposed by sovereign right for the support 

of the government, the administration of law, and the exercise of various 

functions the sovereign is called upon to perform. Many states have 

constitutional or statutory restrictions on the ability of local governments to levy 

taxes, which do not apply to fees or charges. 

User/service fees are charges based upon the proprietary right of the governing 

body permitting the use of the instrumentality involved. Fees have traits that 

distinguish them from taxes. First, they are charged in exchange for a particular 

governmental service which benefits the party paying the fee. Second, they are 

voluntary, in that the party paying the fee has the option of not utilizing the 

governmental service and thereby avoiding the charge. Third, the amount of the 

fee is designed to recover the actual cost of the service being provided. In some 

cases there may be little practical difference between a tax and a fee, but the 

legal distinctions between the two are important. 

Stormwater service fees have been the subject of litigation resulting in reported 

opinions from at least 17 states, including many cases involving final decisions 

by the state’s highest court. In addition, there have been unreported decisions 

from lower courts in states that have involved similar challenges to local 

stormwater fees. Based on these cases, certain common themes have emerged. 

The question of whether a service charge is actually a “tax” has been the issue 

most frequently litigated. Other reoccurring issues involve whether or not the 

charge is voluntary, is it a fee or special assessment, is the fee “reasonable” and 

directly related to the cost of providing the service, are the properties charged 

fees receiving proportionate benefit from the services provided, and must fees be 

confined to cost of providing stormwater services alone or may any surplus be 

applied to capital improvements. 

Determining the legality of a specific financing mechanism chosen will depend 

upon a close analysis of state law. Nevertheless, certain general principals 

emerge from the cases examined. First, for a stormwater service charge to be 

regarded as a fee, rather than a tax, the overall cost of the program must be 

reasonably related to the service being provided, and the funds raised must be 

segregated for use by the stormwater program. Second, the fee should be 

proportional to the property’s contribution to stormwater runoff. Third, 

participation in the program should be characterized as “voluntary”. And forth, in 

states with constitutional provisions governing the imposition of any new tax, it 

may be necessary to seek voter approval for a fee even if it is designed to be 

service-based. 

 ES-3 
The imposition of stormwater service fees on federal facilities involves a special 

consideration of the tax vs. fee issue. In principal, states cannot tax the United 

States (Chief Justice Marshall’s opinion in McCulloch v. Maryland, 1819). On the 

other hand, it is well-established law that the United States must pay reasonable 

user fees. Furthermore, the Clean Water Act contains an express waiver of 

sovereign immunity for certain pollution control related fees. Importantly, this 

waiver applies only to fees or service charges, and not to taxes. 

The United States Supreme Court has established a three-pronged test for 

determining whether fees imposed on federal facilities are “reasonable service 

charges” or taxes. First, is the fee or service charge non-discriminatory? 

Second, is it a fair approximation of the cost of the benefits received? And third, 

is it structured to produce revenues that will not exceed the regulator’s total cost 

of providing the benefits? 

IMPLEMENTING USER-FEE BASED FUNDING

The evolution in stormwater program expectations, which is motivating the 

movement to utility based funding, requires that more than just the revenue 

mechanism be evaluated. The function, service and performance of the 

stormwater program itself become a focal point in the effort to develop a 

stormwater funding mechanism. 

A stormwater utility should be seen as an umbrella under which individual 

communities address their own local problems, priorities and practices. A 

stormwater utility provides a vehicle for: 

• consolidating or coordinating responsibilities previously dispersed among 

several departments; 

• generating funding that is adequate, stable, equitable and dedicated solely 

to the stormwater function; and 

• developing programs that are comprehensive, cohesive and consistent 

year-to-year. 

Implementing user fee based funding involves a related set of actions and 

activities occurring within a flexible process framework. That framework 

promotes “due diligence” in five key areas of focus; political, financial, legal, 

informational, and technical. Bringing about change in the current stormwater 

program and implementing user based funding requires an understanding of 

current needs and problems, a vision for the future and a process framework. 

The use of a citizens/stakeholder participation group and a business plan 

approach can help build a compelling case for action. 

 ES-4 
The process framework should include a “quick concept study” which assesses 

the advisability of proceeding; a “feasibility study” which conducts the detailed 

assessment of the stormwater program and funding and develops 

recommendations; and, the “utility implementation process”. 

The utility implementation process directs the planning and implementation effort 

along four tracks of activity. The “Public Track” insures stakeholder involvement 

and education. The “Program Track” matches program structure to stakeholder 

expectations. The “Finance Track” insures the legality, equity and adequacy of 

the funding mechanism; and, the “Database Track” determines the means to 

compute, deliver, collect and record the charge to be imposed on each property. 

The analysis of stormwater utility funding has many policy implications. Policy 

making usually involves the mayor and council. Day-to-day policy decisions are 

often made at several levels under guidance set by the mayor and council. A 

recommended hierarchy for review of important issues is: key staff and 

consultants, other involved staff, advisory committee, manager’s office, and 

mayor and council. 

CASE STUDIES

Five case studies are examined for City of Bellevue, Washington; City of 

Charlotte/Mecklenburg County, North Carolina; City of Tulsa, Oklahoma; 

Louisville/Jefferson County Metropolitan Service District, Kentucky; and Sarasota 

County Stormwater Environmental Utility, Florida. For each example the 

following is generally provided: keynotes, community profile, formation process, 

service area, role and program, local government structure, organization and 

staffing, funding, inter-governmental cooperation, and public participation. 

The City of Bellevue stormwater management program was established in 1974 

and was one of the first to give equal consideration to water quantity and quality. 

Bellevue’s Storm and Surface Water Utility provides a full range of capital 

infrastructure and operational services, primarily through in-house staff. Funding 

is primarily derived from a user fee that is based on gross property area and a 

factor reflecting the intensity of development of each property. Residential fees

range from $3/month to over $20 per month with an average of about $10/month. 

The annual operating budget is approximately $6 million. The population of 

Bellevue was about 117,000 in 2005. 

The Charlotte/Mecklenburg County approach relies on centralized funding and

regional programs for major systems combined with local management of minor 

stormwater systems. The County, City of Charlotte, and towns have a high 

degree of self-determination in deciding service levels to be provided by local 

systems, programs and funding. Funding of the program is primarily supported 

by a composite stormwater service fee that includes both regional and local 

 ES-5 
components with the County controlling the regional component and local 

governance controlling the local component. The City of Charlotte and small 

towns typically employ a blend of funding from several sources while the County 

relies almost entirely on the service fee. 

In 2005 the population of Mecklenburg County was about three quarter million 

and the population of Charlotte was about 650,000. The County utility was 

instituted in 1994. The total stormwater budget for all entities in 2005 was over 

$85 million with a large part allocated to capital betterments. The fee for a 

single-family house is $1.06/month throughout the County. Local stormwater 

programs of the County, cities and towns are funded by a separate additional 

rate component which ranges from $0.30/month to $6.72/month in Charlotte. 

The Tulsa Stormwater Management Utility was founded in response to a 

devastating flood that killed 14 people and caused nearly $220 million in property 

damage in 1984. A Department of Stormwater Management was established in 

1985 centralizing responsibility for all City stormwater activities, and a stormwater 

utility fee was established by ordinance in 1986 to fund the program. The 

stormwater program budget has recently ranged from $12 million to $14 million

per year. All residential properties are charged a single rate of $3.49/month, and 

fees for other properties are based on the amount of imperviousness on each 

property. The population of Tulsa was about 400,000 in 2005. The program 

includes comprehensive watershed management, dedicated funds for 

maintenance and operation, and a $200 million capital improvements program. 

The Louisville approach involves a consolidation of flood control and stormwater 

management with a regional wastewater collection and treatment program 

provided by the Metropolitan Sewer District (MSD). Most of the smaller cities 

and towns in Jefferson County do not perform stormwater management 

functions. Funding of MSD is primarily from wastewater and stormwater service 

fees, which are independently structured and billed. The accounting is kept 

separately for each function. 

The methodology of determining the stormwater fees in Louisville/Jefferson 

County is based on impervious area. There is flat rate for single-family 

residential properties, and differential rates for other properties based on a 

impervious area equivalency unit. The single-family residential stormwater 

service fee in was $4.41/month. Stormwater service fee revenues in fiscal year 

2005 were expected to be nearly $24 million. There are more than 90 cities and 

towns in Jefferson County. Most, but not all, cities are included in the stormwater 

program. Louisville had a population of about 700,000 in 2005. 

Sarasota County, Florida established a Stormwater Environmental Utility in 1989. 

Primary objectives of the Utility are to reduce flooding, improve surface water 

quality, and attain responsible development practices. A Florida Supreme Court 

decision in 1996 determined that the Sarasota County charge is a special 

 ES-6 
assessment rather than a service fee. As such, it is subject to the standards 

applicable to assessments, which emphasize apportionment of special benefit, 

rather than reflecting the cost of service burden imposed on properties. The 

benefit assessments have three components that are consistent across the 

service area, and one component, system capitalization, that is variable by 

watershed. 

The Utility budget in 2005 was approximately $23 million with about $10 million 

for capital projects. The benefit assessment takes both pervious and impervious 

areas on each property into account. On average, a medium size single-family 

residence is assessed $6.70/month. Sarasota County had a resident population 

of about 340,000 in 2005. There are four cities in the County. The city of 

Sarasota through an inter-governmental agreement relies on the County to 

improve its drainage system and perform most stormwater operations. The other 

three cities retain responsibility for local stormwater systems. 

 ES-7 
CHAPTER 1 

BACKGROUND AND INTRODUCTION 

Municipal stormwater management for local governments has evolved over time 

from an urban flood control function, to a water and resource management 

function, to an environmental protection and regulatory function. All three 

functions now co-exist as responsibilities of local government. This evolution has 

forced changes in how stormwater systems are planned, designed, constructed, 

operated, and financed. More specifically, the stormwater function has evolved 

from a basic capital construction and maintenance program supported primarily 

by local taxes, to a program of integrated water resource management, 

environmental enhancement, and recreational services requiring a multi-faceted 

benefit based finance system. 

The focus of this guidance is to provide a resource to local governments as they 

address contemporary stormwater program financing challenges. The guidance 

includes procedural, legal, and financial considerations in developing viable 

funding approaches. The guidance will examine a range of possible approaches 

to paying for stormwater management, but the focus will be on guidelines for 

developing service/utility/user fees to support these programs. Chapter 2 will 

address various sources of funding. Chapter 3 will cover legal considerations, 

and implementation of stormwater funding programs is discussed in Chapter 4. 

WHAT IS MUNICIPAL STORMWATER

Municipal stormwater is surface water runoff from public and private lands in 

urban areas. Typically municipal stormwater is collected in municipal separate

storm sewer systems consisting of drains, pipes, and ditches, and conveyed to 

nearby streams, rivers, lakes, estuaries, basins, wetlands, and oceans carrying 

with it a variety of urban pollutants.

The United States Environmental Protection Administration (EPA) in their Phase I 

Municipal Stormwater regulations defined stormwater to mean “...storm water 

 1-1 
runoff, snow melt runoff, and surface runoff and drainage.” In their Phase II 

stormwater regulations EPA defined a “municipal separate storm sewer” to mean 

in part, a conveyance or system of conveyances, including roads with drainage 

systems and municipal streets, that is owned or operated by a State, city, town, 

borough, county, parish, district, association, or other public body designed or 

used for collecting of conveying storm water which is not a combined sewer and 

which is not part of a Publicly Owned Treatment Works. 

The nature of stormwater runoff from a given rainfall or snow event changes as 

an area urbanizes and more impervious surfaces are created and the landscape 

and drainage patterns are modified. The volume of runoff, rate of flow, and 

quality of runoff all change as a result of this urbanization. 

HISTORICAL DEVELOPMENT OF STORMWATER SYSTEMS

In the late 1800’s and early 1900’s combined sewers were built to convey and 

dispose of both sanitary sewage and stormwater. Eventually, local governments 

began to separate storm flows from wastewater flows and separate sanitary 

sewer and storm sewer systems replaced combined sewer systems in many 

areas. Early municipal storm sewer systems were designed to discharge 

stormwater rapidly, and included such physical elements as curbs, gutters, inlets, 

storm sewers, roadside ditches, and concrete and grassed lined open channels. 

Thinking began to change in the 1960’s and 1970’s with the recognition that 

efficient stormwater systems also transferred problems downstream. With a 

need to reduce the rate and volume of these stormwater discharges, many local 

governments started requiring new developments to construct stormwater 

detention facilities. 

In the 1980’s and 1990’s stormwater quality became a focus of federal regulatory 

requirements and local governments have had to develop stormwater quality 

programs in response. Under an evolving regulatory mandate a few local 

governments are beginning to recombine dry weather flows in storm sewers with 

sanitary sewage and directing both to treatment plants. 

NEW PARADIGM

The character of the stormwater management function has, and continues to 

change significantly. Originally stormwater systems were built just for 

conveyance, but stormwater is now a component of a comprehensive integrated 

urban water resource, environmental enhancement, and recreational services 

system. Contemporary stormwater management is a multi-dimensional function 

which includes quantity and quality considerations, multiple-use facilities, riparian 

 1-2 
corridors, recreation, wetland preservation and creation, and groundwater 

recharge. 

Stormwater has become a part of the “total” water resources picture and is the 

third leg of the local government water service stool consisting of water 

development, treatment, and distribution; sewage collection, treatment, and 

disposal; and stormwater quantity and quality management. Other more specific 

changes include recognition of stormwater as a resource; restoration of streams 

and rivers; preservation of riparian areas and corridors; use of detention areas as 

parks, playfields, and wetlands; creation and/or restoration of wetlands to provide 

water quantity, quality, and environmental benefits; capturing stormwater to meet 

water supply needs; recognition that homes near greenbelts sell for a premium; 

and evaluation of stormwater from a comprehensive watershed perspective. 

Most of these changes recognize stormwater as a resource, but liabilities have 

also evolved. For example, the disposal of “polluted” stormwater and of 

sediments accumulated in detention/retention facilities is now a performance 

issue for local governments. As a result of the evolving regulatory framework 

stormwater quality issues are now a required part of the urban water resources 

service sector. The reality is that stormwater quality and quantity are joined at 

the hip in today’s stormwater management programs. 

The new paradigm has introduced a whole new array of issues that has resulted 

in basic changes in stormwater planning, design, operation and maintenance, 

construction, and financing. These changes have also resulted in greater public 

expectations. In addition to the effective control of drainage and flooding, the 

public also expects riparian corridors, wetlands, recreation amenities, trails, 

visually pleasing facilities, and a continued maintenance effort. Stormwater 

managers now must find the resources to effectively satisfy these expectations

as well as the regulatory requirements. 

To meet the challenges of the new paradigm some urban stormwater programs 

are evolving into multi-functional operations. Table 1-1 provides a listing of major 

stormwater management components for a utility/service fee type program. Not 

all programs will be this comprehensive, but many local governments in order to 

meet public expectations will likely move in this direction over a period of time. 

 1-3 
Table 1-1: Major Stormwater Management Functional 

Centers1

Administration 

 General Administration 

 Prog Planning and Development 

 Interagency Coordination 

Public Involvement & Education 

 Public Awareness & Education 

 Public Involvement 

 Standing Citizen’s Group 

Billing and Finance 

 Billing Operations 

 Database Management 

 Customer Service 

 Financial Management 

 Capital Outlay

 Overhead Costs

 Cost Control

 Support Services 

Stormwater Quality Mgmt 

 Quality Master Planning 

 Retrofitting Program 

 Monitoring Program 

 Struc and Non-Struc BMP Progs 

 Pest, Herb and Fertilizer 

 Used Oil & Toxic Materials

 Street Maint Prog 

 Spill Response and Clean Up 

 Prog for Pub Ed and Reporting 

 Leakage and Cross Connections 

 Industrial Program 

 Gen Com and Residential Program

 Illicit Con and Illegal Dumping 

 Landfills and Other Waste Facilities 

 Combined Sewer Overflow Program 

 Groundwater & Wellhead Protection 

 Drinking Water Protection 

 Watershed Assessment & TMDL 

 Septic and I&I Program 

 

Engineering & Planning 

 Des Criteria, Stds and Guidance 

 Field Data Collection 

 Master Planning 

 Design, Field and Ops Engineering 

 Hazard Mitigation 

 Zoning support 

 Multi-objective Planning Support 

 GIS and Database Management 

 Mapping 

 Land Use Planning & Controls 

Operations

 General Maintenance Management 

 General Routine Maintenance

 General Remedial Maintenance 

 Emergency Response Maintenance 

 Infrastructure Management 

 Public Assistance

Regulation and Enforcement 

 Code Dev and Enforcement 

 General Permit Administration 

 Drainage Sys Insp & Reg 

 Zoning and Land Use Reg 

 Special Inspection Programs

 Flood Insurance Program 

 Multi-Obj Floodplain Management 

 Erosion Control Program 

Capital Improvements 

 Major Capital Improvements 

 Minor Capital Improvements 

 Land, Easement, and Right-of-Way 

1 Table 1-1 provided by Hector Cyre, Water Resource Associates, Inc., Friday Harbor, Washington, 2005

 1-4 
LEGISLATIVE PERSPECTIVE

Legislative action has dramatically changed the face of contemporary stormwater 

management. This includes passage of laws, adoption of regulations, and 

interpretation of laws and enforcement of regulations by the courts at local, state 

and federal levels. These legislative activities impact all aspects of stormwater 

management by local governments, as well as the private sector, such as 

developers who provide basic infrastructure as a part of their developments, 

industrial facilities that discharge stormwater from their properties, and those 

conducting ground disturbing construction activities. 

Initially stormwater was considered a common enemy and was solely a local 

issue. Local governments constructed stormwater systems to address local 

drainage service needs and flooding problems. Property owners had the right to 

protect their property from stormwater as long as unreasonable harm was not 

inflicted on other properties. Today as a result of the Clean Water Act (CWA), 

stormwater is also a state and federal issue, and landowners are required to 

detain stormwater on their property and provide a level of treatment. 

Passage of the 1972 CWA signaled the beginning of a serious national effort to 

improve the quality of the nation’s streams, rivers, lakes, wetlands, estuaries, 

bays, and oceans. The CWA required dischargers of “point sources” of pollution 

such as sewage treatment plants to obtain National Pollutant Discharge 

Elimination System (NPDES) permits in order to discharge pollutants into the 

nation’s waters. Initially municipal stormwater was considered a non-point 

source of pollution and NPDES permits were not required of municipal 

stormwater dischargers. 

However, stormwater was defined as a point source of pollution in the early 

1980’s pursuant to a federal court decision brought by the Natural Resources 

Defense Council against the EPA. This marked the beginning of the municipal 

stormwater quality mandate through the NPDES permit program. In addition to 

NPDES permit requirements, municipal stormwater systems are also now subject 

to Total Maximum Daily Load (TMDL) requirements of the CWA. 

NPDES permits typically require pollutant dischargers to meet numerical effluent 

limits at the end of the discharge pipe. Because it is difficult to apply this 

standard to stormwater systems, the CWA was amended in 1987. Section 

402(p) was added to the CWA defining basic permit compliance requirements for 

municipal stormwater runoff that are different than those for typical point source 

discharges such as from sewage treatment plants. Section 402(p) required 

municipal storm sewer systems to reduce pollutants discharged from municipal 

stormwater systems to the maximum extent practicable (MEP). MEP is thus the 

standard of treatment for municipal stormwater and its definition is very 

important. 

 1-5 
The following, from the Federal Register, December 8, 1999, p. 68754 publishing 

NPDES Phase II stormwater regulations, is EPA’s interpretation of the meaning 

and intent of the MEP standard. 

 

“Maximum extent practicable (MEP) is the statutory standard that 

establishes the level of pollutant reductions that operators of regulated 

MS4s must achieve. The CWA requires that NPDES permits for 

discharges from MS4s ‘shall require controls to reduce the discharge of 

pollutants to the maximum extent practicable, including management 

practices, control techniques and system, design and engineering 

methods.’ CWA Section 402(p)(3)(B)(iii). This section also calls for ‘such 

other provisions as the (EPA) Administrator or the State determines 

appropriate for the control of such pollutants.’ EPA interprets this 

standard to apply to all MS4s, including both existing regulated (large and 

medium) MS4s, as well as the small MS4s regulated under today’s rule. 

For regulated small MS4s under today’s rule, authorization to discharge 

may be under either a general permit or individual permit, but EPA 

anticipates and expects that general permits will be the most common 

permit mechanism. The general permit will explain the steps necessary to 

obtain permit authorization. Compliance with the conditions of the general 

permit and the series of steps associated with identification and 

implementation of the minimum control measures will satisfy the MEP 

standard. 

Implementation of the MEP standard under today’s rule will typically 

require the permittee to develop and implement appropriate BMPs to 

satisfy each of the required six minimum control measures.” 

The federal/state/local relationship regarding stormwater management was 

fundamentally changed by the 1987 CWA amendments and subsequent 

regulations. There is now a federal mandate that local governments address 

stormwater quality through the NPDES permit mechanism, and there is federal 

and state oversight on how, and how well it is done. Drainage and flood control 

is still a discretionary activity, but stormwater quality management is now 

required of most all local governments 

STORMWATER AS A SERVICE

Uncontrolled stormwater flows can be a danger to both the constructed and 

natural environments, and the control of stormwater and the pollutants it carries 

is a difficult and expensive task. Implementation of stormwater management 

programs and measures by local government, therefore, creates a service 

benefit for the lands and improvements so served. 

 1-6 
Public and private properties are benefited in several ways through the new 

stormwater management paradigm. Benefits include recreation opportunities, 

community aesthetics, environmental enhancement, flood damage reduction, 

protection of transportation systems, development of urban trail corridors, 

handling of excess drainage from public and private properties, maintaining 

property access, protecting and providing water supply, providing regulatory 

compliance, protecting property values, and providing long term system 

maintenance. Also, where there is a community stormwater program with 

oversight and management, the service benefit can include system planning and 

engineering, development of design criteria, flood warning systems, NPDES 

compliance plans and BMP’s; and publication of resource information. 

It is important to realize that a long-term obligation is created when stormwater 

infrastructure is added and stormwater programs are developed. For example, 

all the stormwater facilities that have been constructed, and will be constructed 

as a result of new development or redevelopment, must be maintained in 

perpetuity. NPDES regulations require municipal permit holders to assure the 

maintenance and continuation of these new facilities and programs. Further, 

implementation of NPDES permit requirements will most likely intensify in the 

future. 

 The significant and continuing capital construction, operation and maintenance 

requirements for storm sewer systems, stormwater quality facilities, pollutant 

source control programs, flood control facilities, vector control, drainage 

corridors, detention facilities, wetlands, etc., is beyond the capacity of individual 

property owners, and are services provided by the local government stormwater 

service program. 

ISSUES AND CHALLENGES FOR LOCAL GOVERNMENTS

The new stormwater paradigm presents many issues and challenges. What is to 

be the design and content of the stormwater program, what will it cost, who pays, 

who decides, and how will it be funded? Among these, cost and how to fund it is 

of significant importance to local government. 

 Local governments are expected by their citizens to provide and fund basic 

services such as police and fire protection, local transportation systems, sewage 

treatment, water supply, libraries, social services, and recreation. Stormwater 

quantity and quality must now be added to that list. The new paradigm requires 

the development of institutional and funding frameworks to support this long-term 

responsibility. 

There are legal and equity issues imbedded in the funding considerations. 

Funding of stormwater systems must be relevant and proportional to services or 

 1-7 
benefits provided, or in other words, it must be fair and legal. It will be critical for 

funding options, particularly those that include utility/user fees, to be based on

sound legal principals to avoid challenges. 

Local governments will likely be facing changing rules. Municipal stormwater 

management systems will need to have flexibility to adjust to changes in 

regulations, regulators, legislation, public demands, and court decisions. For 

example TMDLs are developing as a new performance issue for local 

governments. If stormwater discharges contain pollutants contributing to the 

impairment of a water of the nation, additional control requirements may be 

imposed and additional costs incurred. 

Cost and effectiveness are major considerations for local government when 

developing stormwater management programs. MEP is the current CWA 

regulatory standard to which stormwater programs are held. Cost and 

effectiveness should be factors (others include regulatory compliance, public 

acceptance, and technical feasibility) in the selection of BMPs and in the 

approval by regulators of stormwater management programs. 

Partnership opportunities are available to local government in implementing 

stormwater quality programs. Local governments can develop individual 

stormwater programs to meet regulatory requirements; or they can join together 

in partnership with other local governments, including cities, counties, and 

special districts in the conduct and financing of the stormwater program. There is 

good potential for cost savings when local governments work with others in 

implementing control measures required in their permit. 

There are governance decisions to be made. Local governments can implement 

a stormwater program through an existing organization, they can set up a new 

department or organization, or they can develop some combination of the two. 

The decision could influence the funding structure that is used. 

Ultimately, all issues and challenges focus attention on cost and how it is funded. 

The focus of this document is on service/user/utility fees which addresses an 

important element of the funding challenge. 

 1-8 
CHAPTER 2 

SOURCES OF FUNDING 

FUNDING STRATEGIES

Money, Revenue, and Resources 

In formulating a funding strategy for any local government program it is often 

helpful to think of a framework of money, revenue, and resources that can be 

selectively applied to specific needs. Cumulatively they provide the financial 

support required for the mix of capital, operating, and non-operating 

expenditures. It is important to recognize the distinctions that influence their 

capability and suitability for various tasks, and how they can best be 

orchestrated. 

“Money” encompasses a range of sources and types of funds that can be tapped 

to support stormwater services and facilities. Appropriations of general 

revenues, proceeds of bond sales and special-purpose sales taxes, and transfers 

from other accounts represent “money” that have all been used to support 

stormwater programs, either on a one-time basis, temporarily, or as a part of a 

long-term funding strategy. 

“Revenue” is a term usually used in specific reference to the cash flow generated 

by user fees of various sorts and other relatively consistent income streams such 

as charges, assessments, rentals, fines, etc. Most stormwater utilities have a 

periodic charge generally applied to all customers. They may also have other 

revenues generated through special fees applied to individual customers or 

classes of customers (e.g., plan review and inspection fees), special 

assessments, and capital recovery fees of various sorts. In some cases, 

revenue supports other funding mechanisms, as in the allocation of user fee 

revenue to service bond debt. 

“Resources” that support stormwater programs take many forms, ranging from 

developer-contributed capital facilities, to federal and state grants and loans, to 

 2-1 
maintenance of public drainage systems performed by homeowners’ 

associations and private property managers, to land and easement dedications

and other exactions. They also include a variety of funding mechanisms that are 

commonly used to structure how money and resources are applied to specific 

objectives, for example bond issues that are used to fund capital infrastructure 

and inter-fund loans to meet temporary cash flow needs.

Expensed Versus Debt Funding 

Two principal categories of funding employed by stormwater management 

programs are expensed funding and debt funding. Most stormwater programs 

employ a mix of these. 

Expensed funding is typified by “pay-as-you-go” strategies, in which expenditures 

are supported by a more or less concurrent revenue stream. For example, a 

city’s stormwater utility may have a user fee that generates $5 million in annual 

revenues, an appropriation in its road budget for maintenance of roadway 

drainage systems of $1 million, and a total annual stormwater management 

budget of $6 million that essentially matches the combined income. Costs are 

“expensed” as they are incurred. 

Debt funding is typified by bond sales, which are most commonly used to fund 

major capital expenditures, but debt funding may also include intergovernmental 

loans, warrants, and other mechanisms. Debt is sometimes also used to fund 

utility start-up costs, undertake system-wide remediation, or to make funds 

available to cooperating entities in the form of grants or loans. In all these 

examples, borrowing is utilized to enable a stormwater program to expedite 

improvements or activities so as to accomplish its goals more quickly, thereby 

reducing the time of exposure to certain risks. For example, bonding to build 

extensive flood protection works in two years rather than twenty years may be a 

prudent action if valuable property is protected more quickly. 

CHARACTERISTICS OF SUCCESSFUL FUNDING 

STRATEGIES

A Business Plan Approach Is Based on Strategic Objectives 

Some common characteristics are evident among successful stormwater utility 

programs. The most successful programs have relied heavily on a business plan 

model which guides both the program evolution and funding decisions. The 

strategy for accomplishing the program is defined, the type and magnitude of

costs are projected, resource requirements are determined, and timing issues 

are resolved before the analysis of specific funding mechanisms takes place. 

“Needs” are the key driver of program and funding strategies. Authority, 

capability, and a clear vision of the mission are essential, but in the absence of 

 2-2 
compelling needs local government leaders apply their attention and resources 

elsewhere. 

The demands of the diverse stormwater management activities identified in Table 

1.1 challenge local governments’ funding capabilities, and encourage them to 

use a variety of funding sources. State constitutions and legislation, governance 

structures and service responsibilities, drainage problems, needs and priorities, 

local politics and economics, and simply the different ways that communities 

conduct their business all differ and influence their decisions on stormwater 

program and funding strategies. These influences should cause local agencies 

to carefully examine their needs, and the most successful have crafted a detailed 

business plan as a guiding document. 

Effective Stormwater Business Plans Identify Linkages and 

Dependencies 

Stormwater business plans or program strategies contain many linkages and 

dependencies among program components and processes. Addressing some 

needs may require several years as preparatory steps are accomplished. For 

example, even if infrastructure improvements are the highest priority, they may 

have to be preceded by master planning studies, prioritization processes, 

engineering of specific projects, land acquisition, and contracting before a system 

improvement is actually realized. Formal approvals by elected officials may be 

needed at various points in this process, potentially creating additional delays. 

Such linkages and dependencies make timing very influential in structuring the 

business plan. An extended schedule for addressing one program priority may 

present an opportunity to expedite others that do not require so much 

preparatory work or approvals. Routine maintenance is a function most easily 

expedited and can have the most immediate benefit in terms of service 

assurance. Regulatory measures that can be adopted at the discretion of 

managers and that do not require extensive analyses can also be easily 

activated. Other regulatory activities can involve several years, as in the case of 

developing and gaining adoption of design manuals. Education, public 

participation, and other efforts to improve water quality likewise can be initiated 

relatively quickly, but it may take years to demonstrate results. Some remedial 

repairs to deteriorated infrastructure can be accomplished quickly, although the 

process of identifying specific projects, prioritizing them, assembling necessary 

resources, acquiring land or easements, and contracting with vendors can delay 

others. 

The negative experiences of communities that didn’t recognize the relationship 

between program and funding strategies suggest that adopting funding strategies 

or mechanisms, without the benefit of a clear vision of the program strategy, 

creates a high potential for problems. This has proven especially true in the case 

of instituting stormwater utility user fees. One need only review the case law 

decisions in Chapter 3 of this guidance manual to find strong support for the 

 2-3 
proposition that a clear program strategy buttresses funding decisions by local 

elected officials. 

Community Expectations Are Represented in Business Plans 

The most effective stormwater business plans recognize community 

expectations. In some cases, expectations must be elevated by convincing 

demonstrations that stormwater problems exist and can be solved. Stormwater 

management rarely captures public support unless problems impact the daily 

lives of citizens. Many drainage systems are underground and essentially 

invisible to the public. If they are designed, constructed, and maintained 

properly, most people are unaware of them. More visible problems such as 

potholes in roadways consistently rate higher than drainage problems. The most 

effective programs identify and publicize the problems they must address, seek 

public participation and support, and orchestrate the use of various tools and 

resources over time. 

Effective Programs Respond to Change 

Flexibility is an important attribute of utility user fee funding and the ability to 

change as circumstances dictate should be always be a consideration in 

formulating a business plan. User fees provide a stable revenue source, and 

offer equity advantages over traditional tax funding, but perhaps their most 

valuable attribute is their flexibility for funding a variety of operational and capital 

investment needs. A long-range program can be defined with a realistic 

expectation that funding will be available when needed and also suitable for 

changing priorities. However, as a primary funding source, a user fee may lend 

itself to a focus on short-term, rather than a long-term program strategy, which 

can be counterproductive. 

Service Fee Rates Are Cost-Based

The funding philosophy represented by utility service fees of all types is that 

customers should pay in relation to the demands they impose on the services 

and facilities – characterized as a “user-pays” approach. This is a primary 

consideration in selecting parameters from which service fees will be calculated, 

and formulating a rate methodology that results in an apportionment of those cost 

deemed fair and reasonable by the responsible local officials. The most 

successful stormwater utilities are those that have clearly established and 

documented the rationale for linking their service fees to the cost of providing 

services and facilities.

Resources Are Dedicated and Stable 

Whether in city, county, or special district entities, most successful stormwater 

utilities are accounted for as enterprise or special revenue funds that are 

separate and apart from the funding of general public services. As segregated 

accounts, enterprise and special revenue funds limit the use of revenues and 

other resources to a specific purpose, such as stormwater management. Also, 

 2-4 
since reserves can be accumulated from one year to the next, there is no 

pressure to expedite funding at fiscal year-end if that is not prudent. This adds to 

program stability and efficient management of financial resources. 

TRENDS IN FUNDING PRACTICES

Increasing Complexity 

The emerging trends in the 21st Century suggest that funding issues will 

encourage tailoring of funding to specific program objectives, and funding 

practices will branch out in several directions. As stormwater programs become 

more sophisticated, unique local concerns and priorities gain greater visibility and 

support. Also, as more linkages are established with other governmental and 

even private-sector programs, the general trend in funding is toward greater 

complexity, and “standard practice” is increasingly likely to be supplanted by local 

innovations. 

Stormwater utilities established in the 1970’s and 1980’s tended to be funded 

almost entirely from their service fees. Service fee rate methodologies were 

relatively consistent though rarely identical. They were cost-based, and rate 

structures were linked to peak and/or total volume of runoff by fee calculations

employing parameters such as impervious area. Use of other funding methods 

and mechanisms in coordination with service fees was very limited. 

Beginning in the 1990’s a refinement trend emerged. The basic structure of 

funding and service fee rates remained relatively stable, but local entities began 

to push for more sophisticated and detailed cost, rate, and funding analysis. In 

part, this was due to the rapidly increasing technical capability offered by 

computerization and data gathering and processing. It also reflected the fact that 

more large cities instituted stormwater utilities as Phase I NPDES requirements 

were imposed. Their expectations were generally geared to more sophisticated 

cost and rate analyses and they often retained management and rate consultants 

with experience in other disciplines. 

In the first decade of the 21st Century the trends in funding have been primarily in 

response to Phase II of the NPDES program, which impacts many more cities 

and towns than Phase I. This has had two somewhat conflicting effects. The 

introduction of a water quality objective caused many local governments to view 

stormwater management more broadly. However, as an increasing number of 

smaller cities and towns explored stormwater fee options to meet NPDES permit 

obligations, they tended to demand simpler and less expensive approaches than 

those preferred by large communities. These factors have been further 

compounded by federal and state initiatives to manage watersheds holistically, 

which is filtering down through regulatory programs and grant and loan 

opportunities. As a result, the key stormwater funding trends for the next decade 

include the following. 

 2-5 
Blended Funding 

Blending several sources of funding to support stormwater management program 

strategies has been a slowly emerging trend. The most successful stormwater 

programs are supported by several sources of funding, enabling them to spend 

more money to elevate the visibility of the program and improve cost 

accountability of specific functions or improvements. 

Other sources of funding used in combination with service fees include general 

budget appropriations, dedicated special taxes (property, income, sales), special 

assessments, fees charged in lieu of requiring compliance with standards or 

requirements such as on-site detention, system capitalization or development 

impact fees to recover past expenditures or better allocate the cost of 

infrastructure over a period of time, and matching funds such as federal and state 

grants and loans. There are few constraints on local governments’ authority to 

combine and selectively target several types and/or sources of funds to 

accomplish various purposes, see Appendix for examples. 

Multi-jurisdictional Funding 

Cooperative funding with other entities is a hallmark of many successful 

stormwater programs. Several factors have induced stormwater managers to 

participate in multi-jurisdictional funding, especially in recent years as water 

quality considerations became more prominent. 

Stormwater runoff doesn’t conform to jurisdictional boundaries. Drainage waters 

flow from jurisdiction to jurisdiction based on topography. Solving an upstream 

community’s problem may become the source of a problem in another jurisdiction 

located downstream. Thus, the most efficient infrastructure solution for a given 

drainage problem may lie outside the jurisdiction where the impacts are 

manifested. For example, to relieve flooding a regional detention facility built in 

an upstream portion of a watershed in a rural unincorporated area may be less 

expensive and provide better protection than extensive flood protection works 

installed downstream within a major urban area. This may encourage several 

cities and towns in the downstream portion of a watershed to fund a common 

solution higher in the upstream reaches rather than attempt to install independent 

drainage improvements in each of their communities. 

The availability of federal and state grants and loans and cooperative programs 

has also encouraged local governments to join in conducting activities associated 

with stormwater management. This has been a significant inducement to local 

governments to establish stormwater service fee funding. For example, the City 

of Griffin, Georgia was able to obtain more grant, loan, and shared funding from 

federal, state, and county sources during the first two years of its stormwater 

utility operation than was generated in service fees. A key factor in gaining other 

agencies’ financial support was the City’s ability to match their grants and loans

with reliable local funding. 

 2-6 
The presence of stormwater quality program mandates of state and federal 

agencies has also encouraged local governments to participate in cooperative 

programs. The emerging emphasis on stormwater quality has created both 

opportunities and incentives for cities, counties, and special-purpose districts to 

participate in cooperative efforts. Examples include public education, water 

quality monitoring and sample analysis, the development of drainage, erosion 

control, and other technical manuals, and even consolidated development plan 

review. 

Cost-sharing With Other Public Programs 

Successful stormwater utility programs have financial strength that has enabled

them to venture into cost-sharing programs with entities that have different 

responsibilities but shared interests. Greater funding has broadened the scope 

of stormwater management to include related issues such as land use and 

development regulation, environmental protection, and habitat preservation. This 

in turn has revealed more opportunities for linkages with other programs, and 

sharing of resources to address mutual interests and needs is increasingly 

common. 

Wastewater treatment, especially, lends itself to cooperative funding with 

stormwater management, due in large part to the extensive historic use of 

combined sanitary/stormwater sewerage systems in many areas of the country. 

Stormwater separation and inflow/infiltration corrections were often funded as 

wastewater treatment expenses in the past. Now some communities have 

recognized that the expense of separating stormwater and wastewater or 

eliminating stormwater inflows into wastewater sewer systems may be assigned 

to a stormwater cost center rather than wastewater. When a stormwater utility is 

present, the costs shift to properties that generate substantial runoff versus those 

that generate substantial amounts of sewage. 

Watershed management practices and water quality protection also introduce 

opportunities to share costs with other programs. The City of Bellevue, 

Washington Storm and Surface Water Utility has a primary objective of 

preserving small streams. Protection of wetlands and construction of regional 

detention ponds were key elements of the City’s stream preservation strategy. 

The Utility purchased extensive areas of wetlands and other areas along 

streams, and worked closely with the City’s Park Department to manage them as 

passive-use parks and open space. Other properties used for detention and 

groundwater recharge have been developed into active recreation facilities such

as neighborhood playgrounds, soccer pitches, and even tennis courts. 

Countless other communities have built parks, greenways, and trails along 

streams, including examples such as the Mingo Creek linear park in Tulsa, 

Oklahoma and along Cherry Creek, South Platte River, and many other 

drainageways in the Denver, Colorado metro area. Salt Lake City, Utah modified 

 2-7 
and improved a high school baseball field to serve as a major detention facility 

during severe storms and major snowmelt events. 

Some communities have also used their stormwater utility funding resources to 

support program enhancements such as geographical information systems 

(GIS), upgrades to financial management and utility billing/collection systems, 

and transportation improvements such as construction of roadside curbs and 

gutters to replace open ditches. The linkage of stormwater management to other 

programs has justified funding in whole or in part activities such as leaf collection 

to reduce local flooding due to plugged inlets (e.g., Greensboro, North Carolina) 

and street sanding and snow removal/dumping to reduce stormwater quality 

pollution. 

Broader Private Sector Participation

The importance of contributed capital infrastructure built by developers should 

not be underestimated. Though often unplanned and uncoordinated, many early 

components of local drainage systems that emerged in the 19th Century were 

built by the private sector coincidental to commercial, industrial, and residential 

projects. The economic boom of the 1920’s spawned a major surge in private 

investment in public facilities, including stormwater drainage systems. In most 

suburban communities developed since World War II, a majority of the 

stormwater infrastructure has been built by developers and turned over to a 

public entity for long-term operation and maintenance. 

More recently this approach has expanded to include cooperative efforts 

involving public entities and the private sector, with stormwater management 

requirements being integrated with other objectives. For example, a stormwater 

detention facility built by a developer might now be integrated with recreational 

facilities such as greenway corridors, golf courses, baseball fields, or soccer 

pitches. The financial participation in such improvements may be broadened to 

include several public agencies having primary responsibility for the long-term 

operation and maintenance of the facilities. 

This trend has several important implications for stormwater managers. They will 

need to reach out to private-sector entities and programs to identify opportunities 

that serve their mutual benefit. They will need to broaden their community’s 

vision of what stormwater management entails to ensure support for cooperative 

programs with private interests. Because many more developments are being 

built by larger, more competent and better financed development companies, 

local stormwater management programs will need to increase their skills and 

sophistication to keep pace and ensure that participation is optimized. 

Increasing Influence of Technology and Data 

Perhaps the most pervasive factor guiding changes in stormwater management 

in the past thirty years is rapid acceleration of new technology. This directly 

influences trends in stormwater funding practices as well as engineering and 

 2-8 
other technical endeavors involving the availability and management of data. For 

example, the cost of creating or gathering data required to prepare a master 

account file for stormwater service fee billings has plummeted in the past 

decade, from as much as $6/account to less than $0.25/account depending on 

the parameters and rate structure involved. Satellite imagery of extensive land 

areas now renders digital information that is at least as precise as visual 

interpretation of aerial photography, with far greater consistency and reliability at 

much less cost. 

Such increased efficiency encourages local governments to seek more 

sophisticated stormwater service fee rate methodologies, and to combine several 

funding mechanisms in much more complex approaches. However, is it practical 

and beneficial to refine a community’s stormwater service fee rate structure when 

other parameters are not yet as precisely quantifiable? The trend is clearly 

toward more sophisticated rates, but optimizing the value of the rapidly 

increasing technological capability has not yet been adequately addressed. 

FUNDING METHODS AND MECHANISMS

Local Governments’ Funding Authority 

Stormwater management has historically been supported by a range of funding 

methods and mechanisms that reflect the mix of federal, state, and local 

programs. Since this guidance is directed toward the funding of local stormwater 

management programs, especially stormwater utilities, we focus on the 

approaches used primarily by cities, counties, and special-purpose districts. 

Cities and counties in most states are generally authorized by state legislation to 

conduct stormwater management. This general authority is supplemented in 

some states by home rule provisions. Cities and counties adopting such powers 

may gain greater latitude to undertake stormwater management functions, 

regardless of whether specific statutory authorization is available, subject to 

certain limitations and ballot approval requirements. 

The changing nature of stormwater management is also providing greater 

flexibility in stormwater funding. Undeniably, stormwater management has now 

become fundamentally regulatory. Federal and state laws confer a water quality 

regulatory role upon local governments through the NPDES permit program. 

Similarly, adoption of local system design criteria and on-site control 

requirements for runoff quantity is rooted in a regulatory purpose of preventing 

problems. This regulatory foundation may expand and strengthen the local 

authority, especially as it relates to funding decisions. Generally speaking, 

locally-elected officials have greater latitude in adopting fees that are associated 

with regulatory purposes than for other objectives. 

 2-9 
Funding Methods and Mechanisms

Funding methods and mechanisms commonly used for stormwater programs 

include: 

3⁄4 General revenue appropriations 

3⁄4 Stormwater user (service) fees 

3⁄4 Plan review, development inspection, and special user fees 

3⁄4 Special assessments 

3⁄4 Bonding for capital improvements 

3⁄4 In-lieu of construction fees 

3⁄4 Capitalization recovery fees 

3⁄4 Impact fees 

3⁄4 Developer extension/latecomer fees 

3⁄4 Federal and state funding opportunities such as grants, loans, and 

cooperative programs 

General Revenue Appropriations 

Despite the proliferation of stormwater utilities, general tax revenues remain the 

most common source of stormwater management funding. Substantial technical 

analysis is normally not needed to fund stormwater management from general 

revenues, which local governments may use for any legal purpose. The majority 

of most cities’ and counties’ general revenues are from taxes (e.g., property, 

sales, and income), exactions (e.g., franchise fees on utilities), and federal/state 

revenue sharing, and are simply appropriated for specific purposes, including 

stormwater management, through the normal budget process. Because they 

have limited purposes and, in most states, often do not have broad general 

taxing powers comparable to cities and counties, special-purpose districts are 

more likely to be funded through limited property taxes, special assessments and 

service fees. 

The practice of funding stormwater management from general revenues has 

contributed to a dispersal of stormwater management responsibilities. 

Stormwater management is not typically an independent municipal function, 

either operationally or financially. Many city and county functions are peripherally 

involved in or impacted by stormwater runoff. Components of what might be 

collectively considered a consolidated stormwater program are often embedded 

in operational units such as public works, engineering, transportation, street 

maintenance, wastewater treatment, and even recreation. The funding of 

stormwater management in such cases is also typically embedded in whatever 

resources are assigned to the primary function. They may budget for costs that 

are essentially stormwater management, but not readily identifiable as such in 

their budgets. Such dispersion of functions and costs may obscure any 

discernible relationship between demands for stormwater services and facilities

and how the cost burden is apportioned. 

 2-10 
General revenues have several attractive attributes for stormwater management. 

Most cities’ and counties’ general revenues are, in the absence of other 

demands, sufficient to support effective stormwater management. The sources 

of general revenues are usually well-established, fully understood, and wellaccepted by citizens and business interests. They are relatively stable from year 

to year, though economic downturns tend to excessively impact jurisdictions 

whose general revenues are highly reliant on sales and other business taxes 

rather than property value, which is more stable. 

However, general revenues also have significant disadvantages as a source of 

stormwater management funding. Many worthy public purposes, including public 

safety and social services, are commonly funded from general revenues. 

Stormwater management has historically struggled to compete effectively against 

other needs, and major long-term reallocations of general revenues simply to 

enhance stormwater management capabilities are rare. In the absence of a 

major budget reallocation, increasing general revenues to support stormwater 

management implies approval of a tax increase of some sort. Neither option is 

politically attractive for most local officials. 

Because they are not earmarked or dedicated to any specific purpose, annual 

appropriations of general revenues shift with elected officials’ and administrators’ 

perceived priorities. Stormwater management needs are more likely to receive 

better treatment in a year following severe storms and drainage problems than in 

a year following a drought. A lack of stable funding makes it difficult to plan and 

carry out a consistent, long-term program. 

The sources of general revenues have little if any inherent association with the 

origin of stormwater management demands and costs. For example, property 

taxes are a major source of general revenues for many cities and counties. Such 

taxes are usually calculated based on the economic value of land and 

improvements, which have little direct relationship with stormwater runoff quantity 

or quality. Sales taxes are typically based on retail sales, which likewise have no 

identifiable link to stormwater management costs. Franchise fees are normally a 

percentage of the gross income of the activity utilizing the franchise rights. 

Because general revenues are derived primarily from taxes and exactions 

imposed upon businesses and individuals, other parties that impose significant 

demands on stormwater systems and programs may be excluded from 

participating financially in solutions. For example, in cities which have stateowned properties, public universities or federal military installations, a substantial 

demand for stormwater services may be traced to such tax-exempt properties. 

The disparity between the need for stormwater services and facilities and the 

source of general revenues does not end with tax-exempt properties. Some 

private properties, for example discount retail stores, parking lots and 

warehouses that have large expanses of relatively low value impervious 

 2-11 
coverage, do not pay taxes commensurate with the demands they impose on the 

stormwater systems. Conversely, more valuable properties such as high-rise 

office and residential condominium towers that may have less impact on 

stormwater runoff pay substantial property taxes. 

Stormwater User (Service) Fees 

Stormwater utilities funded primarily through service fees are the focus of this 

guidance. Service fees are discussed only briefly in this section, but are covered 

in greater detail in other sections of this chapter. Specifically the sections on 

“Service Fee and Assessment Design Considerations” and “Service Fee Rate 

and Assessment Methodologies” further address this area. 

Although user fee funding of stormwater programs is generally associated with 

the stormwater utility concept inaugurated in the 1970’s, Billings, Montana 

adopted a “storm water charge” in June, 1964. Relying in part on that revenue 

stream, the voters of Billings also approved the issuance and sale of negotiable 

revenue bonds for the purpose of reconstructing and extending the City’s 

stormwater and sanitary sewer systems. This action was challenged in court and 

was eventually upheld by the Montana Supreme Court in 19662

. Billings has 

since funded a majority of its stormwater management programs through the 

charge. 

Billings’ “storm water charge” represented a major departure from conventional 

stormwater funding but did not elicit widespread imitation. The transition to user 

fee funding did not become widespread until the early 1990’s, although several 

cities and counties in Washington, Oregon, and Colorado established utilities

during the 1970’s and 1980’s. The utility user fee concept has now been 

adopted by over five hundred cities and/or counties. It is generally referred to as 

the “stormwater utility” approach because it not only provides user fee funding 

but also incorporates accounting and management practices similar to those of 

other municipal utilities like water supply, wastewater treatment, and solid waste 

management. Similar approaches have been used in Canada and Germany. 

Substantial latitude is available to local elected officials in structuring rates and 

fees, especially if they are associated with regulatory functions. Specific 

methods of calculating stormwater user fees are not mandated by law in most 

states, though some limitations do exist. For example, in Texas the state 

legislature has exempted public universities from local stormwater user fees. 

Most stormwater user fee rates account for conditions on properties that affect 

the peak rate of runoff, total volume discharged, and pollutant loadings on 

receiving waters. A majority are based on the amount of impervious area (roofs, 

paved areas, etc.),3

 which determines both the proportion of rainfall that runs off 

and the peak rate of discharge during and following storms. 

 

2

 City of Billings v. Ralph Nore, 148 Mont. 96; 417 P.2d 458 (1966) 3 Stormwater Utility Survey 2004 – 2005, Black & Veach, Kansas City, MO, 2005

 2-12 
Stormwater rates have also been based on the gross area of properties and 

numerical factors that reflect the intensity of development. A few cities and 

counties have incorporated both gross area and impervious area or the 

percentage of imperviousness into their rate calculation. Other stormwater 

service fee rate parameters include land use classes, zoning classes, and water 

meter size, though these are generally not considered to offer comparable equity 

of cost allocation relative to impervious and gross area methodologies. 

A stormwater user fee is highly flexible and can easily be tailored to individual 

situations and coordinated with other funding methods. Revenue from user fees 

and other funding sources can be blended together or a fee might be applied 

only in a limited service area rather than the entire jurisdiction, excluding other 

areas which do not require service or are impractical to serve. No fixed practice

prevails; though most cities apply their user fees city-wide and many counties

define more limited service areas where urban/suburban conditions exist. 

User fees are also authorized for some types of special-purpose districts, which 

may apply them district-wide or designate them only for specific service zones. 

Such approaches can be combined, as in the case of a stormwater utility that has 

both a general service fee and also administers special-purpose improvement 

districts to fund localized improvements or services. 

The stability of a dedicated user fee revenue stream ensures that long-range 

scheduling of capital improvements and operations can be done with reasonable 

assurance. User fees may also free up general revenues and other resources 

allocated to stormwater management for other purposes. 

The greatest potential disadvantages of stormwater user fees are high visibility of 

the charge and the cost of its development and implementation. Regardless of 

technical distinctions between "taxes", "exactions", "assessments", and "service 

charges", any form of government funding may be viewed by some citizens as a 

"tax" and thus be unpopular. However, the high visibility of a defined stormwater 

user fee might also be beneficial if it convinces a community that long-standing 

flooding or pollution problems will be addressed. 

The cost of developing and implementing utilities reflects the size of a community 

or the complexity of processes employed. Some of the formative costs such as 

program and cost analyses are essentially common to all situations. Others are 

“unit” costs. For example, data must be assembled to populate a master account 

file for billing. The cost of implementing a utility user fee is a function of the 

number of accounts, and the total cost typically amounts to eight to twelve weeks 

of the revenue stream that is created. This includes all costs associated with the 

necessary program and financial analyses, data assembly, modification of billing 

and other information systems (or activation of a new system), and public 

education and involvement. 

 2-13 
Plan Review, Development Inspection, and Other Special Fees 

A variety of special user fees could reasonably be included under the scope of a 

stormwater utility or adopted separately to support regulatory measures. Most 

often they are related to special services provided to a limited group, as opposed 

to user fees that are generally applicable to utility customers. Such fees 

apportion the costs only among those who require the service or cause the need 

for the regulatory measure. 

Fees for the performance of regulatory activities are usually associated with 

protecting the public health, safety, and welfare in some manner. Some 

regulatory activities may be mandated by federal and/or state requirements or as 

conditions of NPDES or other permits. Regardless, to the extent special fees are 

associated with a regulatory function (e.g., development regulation); authority to 

institute them is typically a product of the police powers of the governance entity. 

Special fees may also have other applications, such as a cost recovery 

mechanism that assigns certain expenses to a specific group. For example, 

experience has demonstrated that maintenance of on-site detention systems is 

frequently ignored or deferred by property owners, or alterations may be 

intentionally or unintentionally made to such facilities. Inspections may be 

necessary to ensure that on-site systems are properly maintained and not altered 

from their approved design. Placing the cost of such inspections on the specific 

property owners through special fees relieves the general taxpayers or utility 

ratepayers of the expense. 

Special fees typically provide only a small additional amount of revenue for a 

stormwater utility, but enhance the equity of cost apportionment. Adoption of 

such fees may require that other fees associated with regulatory reviews, 

inspections, or special services be evaluated to ensure that individuals are not 

being charged twice for the same service. 

Special Assessments 

Special assessments have been used to fund capital improvement and operation 

of stormwater systems since colonial times. The assessment concept is 

predicated on apportioning costs in proportion to the direct and special benefits 

individually derived by specific properties. It has been applied to funding of 

various public facilities, ranging from sidewalks and roads to flood control 

channels and dikes. In application to stormwater management, the special 

assessment mechanism has evolved as the management paradigm changed. 

The chief drawback of the traditional special assessment methodology is that the 

distribution of costs must be proportionate with the direct and special benefit 

accruing to each property being assessed. Although standards differ from state 

to state, generally the benefits must be definable, measurable in some economic 

manner, and available to the property being assessed within a practical 

timeframe. In most cases, general benefits accruing to all properties as a 

 2-14 
consequence of a stormwater improvement or activity cannot be used to justify a 

special assessment. 

The courts have established substantially different standards for special 

assessments versus service fees. Broader latitude is given to local elected 

officials in setting service fee rates, and especially those associated with 

regulatory purposes. Special assessments must conform to more restrictive 

technical standards based on apportioning costs to reflect the value of benefits 

accruing to individual properties. Fully complying with the standards the courts 

have set for special assessments may therefore require more precise and costly 

data than is needed to support a service fee, which must simply be fair and 

reasonable. 

Special assessments for drainage are most workable in relatively localized or 

specific applications. For example, improving a ditch or channel that directly 

serves a few properties or a relatively small service area is an appropriate project 

for special assessment funding. A special assessment is less suitable for capital 

projects that serve a wide area, and may be wholly unsuited to facilities providing 

a general benefit to the community at large. 

Much of what must be done to effectively manage stormwater quality may not be 

directly and specially beneficial to individual properties. Thus, special 

assessments are not widely used as a primary funding mechanism for that 

purpose, though in recent years several benefit assessment areas have been 

instituted in Southern California to support local water quality programs, and 

Florida counties fund stormwater management through assessments (as so 

defined in a Florida Supreme Court decision) that are similar to many stormwater 

service fees. 

Bonding for Capital Improvements 

The expense of major capital infrastructure, land, and equipment has posed a 

significant challenge for stormwater programs whose annual revenues and 

resources are limited. As a result, local governments have used bonding to fund 

major capital improvements for many years. 

Bonds are sometimes used to fund operations as well as capital improvements, 

though that practice is not generally viewed as prudent and some states prohibit 

or limit such uses of bonding. However, some stormwater management costs 

can be viewed either as a capital or operating expense. For example, remedial 

repairs to aging infrastructure might legitimately be viewed as either a capital 

expenditure or an operating expense. 

Bonds are not a revenue source, but rather a method of borrowing money to fund 

expenditures. Debt service of bonds is commonly derived from general 

revenues, service fees, or special assessments. In some cases, specific funding 

mechanisms or sources are identified in bond covenants. For example, a bond 

 2-15 
might be issued with debt service to be paid from a special local option sales tax 

or a special assessment upon properties served by the improvement. 

The chief advantage of bonding is that it allows expenditures that far exceed 

current revenues and resources. Construction of major improvements can be 

expedited in advance of what could be funded from annual budget appropriations 

by spreading the costs over time, much like a home mortgage or automobile loan 

enables a buyer to acquire assets they could not afford to buy for cash. 

In the case of stormwater management, expediting a capital project by several 

years through bonding may result in significant public and private savings if 

flooding, other damaging impacts, and inflation of land acquisition and 

construction costs are avoided. The major disadvantage of bonding is that it is 

essentially a loan that incurs an interest expense, increasing the total cost of 

capital projects. 

Two types of bonding are available, revenue bonding and general obligation 

bonding. General obligation bonding incurs a debt that has first standing with 

regard to public assets and is backed by the "full faith and credit" of the issuing 

agency. All revenues and resources of the entity, including various taxes, may 

be used to service a general obligation debt. Revenue bonding is supported and 

ensured only by specified revenues, such as service fees or assessments. As a 

result, the bond market sometimes imposes higher interest rates on revenue 

bonds and/or dictates that excess revenue be generated (termed coverage) to 

reduce the risk of non-payment. Recent experience suggests that the bond 

market has recognized the stability typical of stormwater utility service fee 

income, and has priced stormwater revenue bonds favorably. 

Cities and counties in some states are also authorized to issue bond debt that is 

backed by the full faith and credit of the issuer but has debt service funded from 

a designated revenue source. This is commonly referred to as “double-barreling” 

of bonds. The full faith and credit provision is simply a fall-back if the revenue 

stream should fall short. Such bond issues typically attain the bond rating and 

interest rate of the issuing agency’s general obligation debt, but the entity’s 

general tax revenues and statutory debt limits are not burdened. 

In-lieu of Construction Fees 

In-lieu of construction fees are not specifically authorized under most state laws, 

but might be adopted in some circumstances as one element of a comprehensive 

stormwater utility user fee rate methodology or as a regulatory fee. Such fees 

have been charged in lieu of requiring construction of on-site stormwater systems 

for many years.4

 

 

4

 For example, Tulsa, Oklahoma instituted fees in lieu of requiring on-site stormwater detention

improvements on each and every development project in more than a dozen watersheds during the 1970’s, 

and used the revenue to defray a portion of the expense of regional detention facilities in those areas. 

 2-16 
In-lieu of construction fees are sometimes confused with impact fees. However, 

an in-lieu of construction fee is usually a substitute for requiring on-site solutions 

such as detention storage. They may be used even in instances when an on-site 

system would work but an offsite regional facility is preferable. 

In contrast, impact fees are generally used to pay for off-site measures to 

compensate for the service-demand effects of development that are not solvable 

on-site. For example, the impact of a shopping center on stormwater runoff 

might be resolved either by requiring an on-site detention system or by building a 

regional facility off-sight that is paid for (in part) through the in-lieu of construction 

fee. Shopping center traffic that clogs nearby roads cannot be solved on-site, but 

an impact fee might be used to pay for additional traffic lanes and/or signalization 

to mitigate the impact. 

The need for in-lieu of construction fees associated with stormwater 

management stems from problems that have emerged with on-site measures to 

mitigate development impacts. Experience has shown that requiring developers 

to install individual on-site detention and water quality facilities can lead to a 

regulatory and/or maintenance problem for a local government. Alternative 

regional solutions may be more efficient and reliable in controlling runoff volumes 

and pollutant discharges into public stormwater systems and streams. However, 

on-site systems are typically funded by the developers whereas the general 

public usually pays for regional systems. An issue of equity arises if general 

taxpayers or ratepayers have to fund regional solutions to mitigate the impacts of 

private development projects rather than requiring on-site control. 

The flexibility to address issues either by on-site mitigation or by alternative 

actions elsewhere is advantageous if the financial conundrum can be resolved. 

An in-lieu of construction fee offers a practical option that may be preferable to 

both developers and local governments. Developers simply pay a fee in-lieu of 

designing and building an on-site system or facility, and the local government 

obtains financial support for more efficient and reliable regional systems. 

The most significant disadvantage of in-lieu of construction fees is that they 

rarely generate sufficient revenue to fund construction of regional detention 

facilities, enlarge conveyance systems, or install water quality facilities in a timely 

manner. Also, they do not fund maintenance. This dictates that other revenues 

must be available to initially build and maintain regional facilities, and taxpayers 

or ratepayers are the parties burdened with those costs. However, over time, inlieu of construction fees can contribute a meaningful component of the total longterm funding of regional facilities and equitably compensate those who have 

initially borne the costs. 

In-lieu of construction fees are not necessarily easy to implement. They demand 

well-refined capital improvement plans and analyses of on-site versus regional 

alternatives, from which the alternative cost of the regional options can be 

 2-17 
reliably determined as the basis for setting the fees. This may necessitate 

detailed and costly analysis of potential regional facilities when a simple 

regulatory approach would suffice. At least a portion of the cost of preparing 

suitable analyses and documentation should be incorporated into the structure of 

in-lieu fees. 

Capitalization Recovery Fees

Capitalization recovery fees are also known as system development charges, 

capital facilities fees, utility expansion charges, and by other titles. They are not 

specifically provided for by authorizing legislation in most states, but have been

incorporated into various utility user fee rate structures for many years. 

Capitalization recovery fees are sometimes confused with impact fees and even 

with in-lieu of construction fees. Capitalization recovery fees are most often 

intended to recover a fair share of the prior public investment in infrastructure 

capacity installed to accommodate future development. The fees are applied to 

developers who make use of that provisional capacity when they develop 

projects. In some instances, capitalization fees may also be used to attain 

suitable apportionment of future capital costs. This is particularly applicable in 

cases where funds have been accumulated in preparation for major capital 

projects. 

There are several ways of structuring and calculating capitalization charges, 

including the growth-related cost allocation method, the system buy-in approach, 

the marginal incremental cost approach, and the value of service methodology. 

They differ from in-lieu of construction fees and impact fees primarily in terms of: 

1) the fundamental purpose of the charges; 2) the timing of improvements versus 

when the charges are collected; and 3) their relationship to the specific facilities 

that are funded through user fees. In most cases, capitalization recovery fees are 

related solely to capital costs, though some justification may exist in certain 

circumstances for incorporating long-term operating expenses. 

Capitalization charges provide a mechanism whereby developers participate in 

paying for capacity that was previously built into public systems in anticipation of 

their needs or which is planned for the future and for which funding is being 

accumulated in anticipation of building the improvements. In effect, they allow a 

deferral of participation in the capital cost of facilities until a property is developed 

and either makes use of the provisional capacity already in place or buys into the 

previously accumulated fund reserves intended to build future improvements. 

The use of such fees for stormwater management capital costs is clearly 

appropriate since most drainage systems are consciously designed to provide 

capacity to accommodate future development in an economical manner. 

Whether a stormwater capitalization charge is appropriate in specific cases may 

be related to the user fee rate methodology that is employed. For example, 

many stormwater user fees are based solely on impervious area where only 

 2-18 
developed properties are charged. Undeveloped properties do not have 

impervious area and therefore are not charged. However, the capital facilities 

being funded by the fee are normally designed with future conditions in mind. 

This initially results in excess capacity being built into the system, which is paid 

for solely by currently developed properties. A capitalization charge may 

therefore be an appropriate recapture mechanism to ensure a fair and 

reasonable allocation of the capital costs among all properties using the facilities 

over time. 

If the rate methodology allows user fees to be charged to undeveloped 

properties, a recovery mechanism may not be needed at the time properties are 

developed. The rate structure might have a system capitalization component 

that assigns an appropriate proportion of the capital costs to undeveloped 

properties based on expectations of the future developments and their 

stormwater system demands. 

Impact Fees 

Impact fees have been adopted by local government entities for a variety of 

public infrastructure components. They are based on the cost of mitigating 

development impacts of individual developments by building public off-site 

improvements where impacts can’t be solved on-site. For example, traffic impact 

fees support the cost of additional lanes and/or signalization to accommodate the 

added traffic generated by projects such as shopping malls and high-rise 

condominiums. Such impacts cannot be effectively addressed by on-site 

facilities. Impact fees have also been employed to meet communities’ park and 

recreation standards and other objectives. 

Standards and requirements have evolved for adopting and applying such fees 

and have been institutionalized in legislation in several states. Some of these 

statutes impose so many administrative burdens and limitations on use of the 

impact fee revenues that they are essentially impractical. At least one state, 

Georgia, has adopted legislation that specifies limited uses of developer impact 

fees that do not include stormwater management. Specific applications of impact 

fees have also been the subject of a great deal of litigation nationally. An 

unusual aspect of impact fees is that state courts around the country have been 

notably inconsistent. Recent cases that have reached the United States 

Supreme Court have added some clarity. The following is a summary of 

pertinent cases provided by David Burchmore, author of Legal Considerations,

Chapter 3. 

City of College Station v. Turtle Rock Corporation, 680 S.W.2d 802 (Texas 

1982) 

College Station adopted an ordinance requiring developers to dedicate 

land or pay an in-lieu fee for new parks. Turtle Rock paid the fee and 

sued. The Texas Supreme Court ruled that the ordinance was 

 2-19 
"reasonable" and "accomplished a legitimate goal substantially related to 

public health, safety, welfare." 

Nollan v. California Coastal Commission, 483 U.S. 825 (1987) 

Nollan wanted to replace his beachfront bungalow with a larger house. 

The Coastal Commission required public access across his property to the 

beach and an adjacent park. Nollan sued. The US Supreme Court 

supported Nollan, stating there was no "essential nexus" between 

imposed conditions and impact of use. 

Northern Illinois Builders Association v. County of Du Page, 165 Ill. 2d 25 

(Ill. 1995) 

NIBA challenged the legality of two State enabling acts and three County 

ordinances imposing road impact fees. The court declared the first act and 

the first ordinance unconstitutional, and the second act and second 

ordinance constitutional. Monies collected under the first ordinance were 

ordered returned. 

In Hillis Homes v. Snohomish County, 97 Wash. 2d 804 (Wash. 1982), the 

state Supreme Court invalidated an impact fee imposed on residential 

development to help pay for schools on the ground that the exaction was 

in effect a tax intended to raise revenue, rather than a fee intended to 

regulate land use, and that only the state legislature could levy such a tax. 

Florence Dolan v. City of Tigard, 512 U.S. 374 (1994) 

Ms. Dolan wanted to expand her hardware store and pave her parking lot. 

Tigard requested dedication of an adjacent floodplain and bikeway. Dolan 

refused and sued. The US Supreme Court ruled there was no "essential 

nexus" and that the City failed to demonstrate that the benefits justified the 

requirements. 

Erlich v. City of Culver City, 114 S. Ct. 2731 (1994) 

The Supreme Court extended the Dolan analysis from property 

dedications to development fee exactions. Erlich was the owner of a 

defunct private health and tennis club, and sought a building permit to 

construct condominium townhouses on the project site. The city approved 

the permit but conditioned it on payment of numerous fees, including 

$280,000 to enable the city to build tennis courts that would replace the 

facilities lost with the demolition of the tennis club. Erlich refused, and 

sued claiming that the fee exactions bore no relationship to the impact 

caused by the project. The Supreme Court granted certiorari, vacated the 

judgment of the lower court dismissing the case for failing to state a 

takings claim under the Fifth Amendment, and remanded the case "for 

further consideration in light of Dolan." 

 2-20 
Impact fees are typically limited to situations in which the impact of new 

development on existing infrastructure systems is: 1) measurable and certain; 2) 

of definable geographic or systemic extent; and 3) quantifiable in terms of the

incremental capital investment that will be required to maintain (not attain) an 

adequate service level in the face of the added growth attributable to the subject 

development. The final point is critically important in terms of stormwater 

management systems. Impact fees cannot be used to bring inadequate existing 

systems up to an adequate service level. Nor can they be used to address the 

impacts of other past, present, or future developments. Thus, they are not useful 

in correcting many deficiencies that already exist in stormwater systems. Impact 

fee revenues must also be earmarked for specific projects or uses, must be 

expended relatively quickly, and, if not, must be returned to the developer, often 

with interest. 

Developer Extension/Latecomer Fees

Developer extension/latecomer fees are a good example of resources available 

to stormwater management entities that do not directly generate income but 

support attainment of important objectives. They are not a revenue mechanism, 

but rather a means of apportioning capital costs among several properties as 

they are developed. The most common use of this type of fee around the country 

is for water and sanitary sewer system extensions. 

Extensions to utility systems and other infrastructure improvements are often 

built by developers. Under the developer extension/latecomer fee concept, the 

initial developer is later compensated for providing the facilities by fees applied to 

subsequent developers that tap onto or otherwise make use of the 

improvements. Although such fees are not specifically authorized in legislation in 

most states, they can be adopted as part of a comprehensive stormwater user 

fee rate structure or negotiated on a case by case basis. 

A developer extension/latecomer fee works in the following way. Developer "A" 

proposes a project that requires a stormwater (or water, or sewer) system with 

"x" capacity for its own purposes. However, practical design considerations 

indicate that a larger system should be installed to properly serve other nearby 

properties that are currently undeveloped. Developer "A" therefore is required to 

build a larger system than necessary simply to serve his or her own property, and 

incurs an additional cost. Property owners subsequently tapping into the 

improved system when their development occurs are charged a one-time fee,

and the fee is then transferred to Developer "A". This type of fee is structured so 

that Developer "A" and all other users of the facilities ultimately bear a fair 

proportion of the capital cost. The management entity typically receives no 

revenue from the fee, although some charge administrative expenses on top of 

the capital cost. 

 2-21 
Federal and State Funding 

Federal and state funding for local stormwater management takes many forms, 

including technical support, facility construction, cooperative programs, and 

grants and loans for various purposes. Local governments are generally 

authorized to make use of federal and state government funding, such as the 

State Revolving Fund Loans financed by EPA to achieve CWA objectives, for 

various purposes including stormwater management, flood control, and water 

quality protection. 

SERVICE FEE AND ASSESSMENT DESIGN

CONSIDERATIONS

The remainder of this chapter will focus on service fees and to a lesser extent 

assessments. 

There are many reasons for local governments to adopt service fees to fund their 

stormwater programs. These include: 1) generation of sufficient revenue to meet 

capitalization and operational expenses; 2) customizing the apportionment of 

costs among various segments of the community; 3) support a growth 

management strategy, facilitate life-cycle asset management, or help segregate 

costs related to unfunded federal and/or state mandates; and 4) diminish a 

general revenue budget problem by moving stormwater off that source of funding 

and substituting service fees. Regardless of the specific motivation, the process 

of designing a stormwater utility funding strategy introduces the need for a higher 

level of analysis than that required for general fund revenue allocations. 

Design of both service fees and assessments must meet general and technical 

standards. Standards differ between fees and assessments, and vary from state 

to state as a result of constitutional, legislative, and case law differences as 

addressed in Chapter 3. Selection of a preferred approach is not a purely 

technical issue. It is not required that the very best technical approach be 

selected. A user fee rate structure that fits local practices and meets basic 

industry standards may serve a community better than a highly detailed, very 

expensive approach that is confusing to the public. In many cases, decisions are 

influenced by practical considerations like public perceptions of equity, 

implementation and upkeep costs, timing, and ease of understanding. The 

following considerations are among those commonly used to evaluate and select 

preferred methods for design of user fee rate structures. 

Legality 

Nearly thirty (30) percent of the respondents to a recent national survey of 

stormwater utilities indicated that their stormwater utility funding decisions had

 2-22 
been subjected to a legal challenge of some sort.5

 That such a high percentage 

would be contested on legal grounds is probably not surprising given that the 

funding decisions and user fee rate structures involve money. The legal issues 

are addressed more thoroughly in Chapter 3, Legal Considerations, however the 

following is provided to help provide context for service fee and assessment 

design considerations.

Stormwater management is clearly a function that falls within the general 

authority of cities and counties in most states. Managing and funding that 

function as a utility is now an accepted practice, and both cities and counties 

have the latitude to adopt stormwater user fees in many states. The courts in 

several states have determined that there are certain characteristics that 

determine whether a charge is a tax, service fee, special assessment, or 

exaction. Although the detailed findings in the various states differ, they are 

influenced by both intent of the legislative body and the structure and application 

of the funding methods and charging mechanisms. Procedural issues that may 

have an impact on the legality of service fees and assessments include the 

following: 

3⁄4 What was the intent of the jurisdiction in establishing the charge, and how 

are funds being used? 

3⁄4 Was the service fee adopted simply to counter a budget deficit, or was it 

predicated on meeting stormwater program costs? 

3⁄4 Does the rate structure satisfy general standards of how service fees 

should be applied to individual properties? 

3⁄4 Are similar fees charged to similarly-situated properties or customers? 

3⁄4 Are charges to disparate properties or parties consistent and balanced? 

3⁄4 Did the local board or council act with adequate knowledge and 

consideration of the issues? 

3⁄4 Were all procedural steps scrupulously followed? 

3⁄4 Was adequate publication of notice of intent given for all of formal actions 

taken by elected officials? 

Equity 

Attainment of equity is a fundamental objective in the design of both fees and 

assessments, and one of the primary justifications commonly cited for 

establishing a utility. Equity has both technical and perceptual aspects. Service 

 

5

 Survey of Stormwater Phase II Communities, National Association of Flood and Stormwater 

Management Agencies, Washington, DC, July 1999

 2-23 
fee rate methodologies are designed to attain “equity” as a fair and reasonable 

apportionment of cost of providing the needed services and facilities. Fees are 

expected to have a substantial relationship to the cost of providing the services 

and facilities to each customer. In contrast, assessments seek to equitably 

apportion benefits derived from facilities or services as the means of applying the 

cost of them. Exactions, such as stormwater impact fees, are not necessarily 

required to meet standards applicable to fees or assessments, but must exhibit a 

rational nexus or linkage between the exaction and the purpose of the fee. 

Taxes generally have to meet only the standards contained in authorizing 

legislation.

Equity must be weighed against simplicity and clarity. The best utility rate 

structures generate charges that clearly and simply relate to the services and 

facilities being provided. A utility service fee rate structure might be highly 

equitable in terms of assigning costs according to service demands, yet still be 

deficient politically if it is too complex for the public to grasp the linkage between 

service, costs, and charges. In the case of stormwater management, most 

people can understand that replacing natural earth with impervious pavement or 

structures will diminish infiltration of water and increase runoff. Thus, rate 

structures based in some manner on impervious area and gross area are 

common. A realistic objective is to be consistent within generally accepted 

technical standards that most people will view as fair. 

Courts in most states have usually deferred to the judgment of local elected 

officials in determining what constitutes equity in local applications and have 

demonstrated a reluctance to intervene in the details of rate or assessment 

design. Applications accepted by various courts suggest that the relationship 

must only be sufficient to satisfy reasonable common sense. This leaves the 

structure and level of service fees, assessments, and some exactions largely at 

the discretion of locally elected officials. As a result, details of service fee rate

methodologies, assessment formulae, and some exaction charges can vary 

significantly. However, a governance body may not act arbitrarily and 

capriciously in setting rates and the resulting service fees may be illegally 

discriminatory or confiscatory. 

Technical Foundations 

Stormwater service fee rate design practices are derived from an understanding 

of hydrology and stormwater runoff from individual properties. A rate structure 

analysis is performed to determine how costs might be apportioned among those 

who are served in various ways by expenditures for operations, capital 

improvements, and support activities. Since stormwater facilities and services 

cannot be metered or directly measured, they must be represented by one or 

more parameters believed to reflect the service demands and therefore the 

costs. 

 2-24 
Timing is a consideration in formulating rate methodologies and setting the 

amount of fees. The structure of a rate methodology is intended to recover 

pertinent costs over a given period of time, most commonly a budget period or, in 

the case of bonded capital projects, a debt service period. For example, 

infrastructure is provided to collect, convey, and discharge stormwater runoff in a 

manner consistent with prudent design and applicable water quality standards. 

The resulting system capitalization is generally applicable to all properties 

served by the improvements, ranging from those at the top of the hill to those at 

the bottom of the hill who are protected from upland drainage. By using different 

rate parameters and finance mechanisms, a rate designer can alter the 

apportionment of costs among such customers over time. 

Expensing capitalization costs through annual budgets focuses the financial 

impact on rates that customers pay during the budget period in which projects 

are constructed. Bonding to finance projects spreads capitalization cost over the 

debt service period. Accepted rate design standards do not dictate that costs be 

allocated on an annual, debt-service period, or service life basis. That is left to 

the discretion of locally elected officials. What is expected is that apportionment 

of costs is generally consistent with the service demands of the properties served 

by the facilities. 

Life-cycle costing of stormwater infrastructure is an emerging issue. Because a 

large proportion of the cost of stormwater capital infrastructure is initially borne by 

private developers, their costs have not been allocated directly to stormwater 

ratepayers in most cost and rate analyses. However, much of the stormwater 

infrastructure built by developers is transferred to public stormwater service 

providers, and the long-term expense of recapitalizing the improvements as they 

wear out becomes a public cost. Cost of sustaining such infrastructure has not, 

however, been incorporated into financial planning and analyses of most local 

governments or stormwater utilities. 

With the advent of the stormwater utility concept, the perspective on long-term 

life cycle accounting of stormwater infrastructure has begun to change. Most 

water, wastewater, electrical and other utilities have incorporated the life-cycle 

cost of capital assets in their rate projections and financial reporting for many 

years. In 1999 the Governmental Accounting Standards Board (GASB) 

introduced Statement 34 on infrastructure reporting which introduces comparable 

accounting for capital assets into general governmental practice. This reinforces 

the standard of full accounting for life-cycle costs of stormwater systems and 

facilities, and mandates incorporating them into cost and rate analyses. 

Origin of Costs 

Conditions on individual properties, which collectively dictate what types of 

systems, programs, and activities must be provided, are primary factors 

influencing stormwater costs. The objective of service fee rate design is to craft 

a schedule of fees for various users that reflect the cost of efficiently meeting 

 2-25 
their cumulative service demands. Modern stormwater assessment design 

objectives are more often reflective of the cost of providing benefits to the subject 

properties rather than value of the benefit, which was the traditional approach 

employed when assessment were based on property value. 

“Service” can be defined in much broader terms than just operational activities 

and physical facilities directly attributable to a given property’s stormwater runoff. 

For example, it is clearly a service to upland properties that their stormwater 

runoff is collected and safely conveyed to a discharge point. Such service 

relieves them of the responsibility of disposing of their runoff, and reduces their 

potential liability for downstream impacts. At the same time, a service is also 

clearly being provided to downhill properties in the form of protection from the 

upstream runoff. Flood protection and regulatory programs that protect 

floodprone areas reduce public emergency and recovery costs. Drainage of 

roads and sidewalks facilitates mobility essential for public safety services, 

commerce, education, and other aspects of modern life. Stormwater quality 

management protects and enhances environmental health. 

Precision is not a defined standard in formulation of costs or service fee rates. 

Cost analyses produce estimates, some of which can be more exact than others. 

The cost of operating a particular piece of equipment can be rather accurately 

projected, but watershed capital infrastructure plans may provide only an 

engineer’s estimate of the future cost of acquiring land and constructing a 

stormwater facility. An estimate may be a valid reference point for incorporating 

projected capital costs into rate structure and fee analyses, but the actual costs 

may vary from the estimate. And the rate structure and/or fees may have to be 

adjusted from time to time. 

A variety of approaches are used in assigning costs among customers. Some 

communities have opted to localize capital costs by watershed to attain a high 

degree of association of their infrastructure costs with the property owners 

served. Localizing capital costs by watershed is also common practice when 

stormwater utilities employ special assessments. Most, however, have 

determined that their system capitalization costs are relatively consistent, that the 

service provided by such improvements is not limited to individual properties in 

specific areas, and allocation of the costs can reasonably be applied to the entire 

jurisdiction or utility service area. They reason, for example, that adequate 

drainage system capitalization along roadways is a service to the entire 

community. 

A community’s historic approach to capitalizing stormwater infrastructure may 

influence rate design. Many communities have historically funded stormwater 

system capitalization from general revenues, spreading the cost throughout the 

community, though facilities may not have been equally capitalized throughout 

the jurisdiction. After spreading the cost community-wide for years but not 

attaining uniform service capability, it would be inappropriate to localize future 

 2-26 
capital costs by watershed even if that approach more closely reflects the origin 

of cost for specific facilities to be built by the stormwater utility. 

Revenue Sufficiency 

If a service charge is adopted, it is essential that the enhanced stormwater 

program provide visible results. A new fee that doesn’t achieve a higher level of 

service is more likely to face opposition than one that provides demonstrable 

improvements. In order to ensure that is attained, a service fee, along with any 

other funding sources, must generate sufficient revenue. 

Flexibility 

A service fee offers extraordinary flexibility compared to other funding methods. 

Within reason, a rate structure can be designed to apportion costs as a board, 

council, or commission wishes. There is no absolute prescription that must be 

followed. For example, some communities charge properties located in 

floodplain areas less than upland areas, but the City of Boulder, Colorado 

imposes a surcharge for floodplain properties. Some communities only charge 

developed properties, while others also charge service fees to undeveloped 

lands. 

The latitude given to local elected officials to make various decisions regarding 

the design of a rate structure is a distinct contrast to taxation concepts based on 

property value and assessments based on benefit. Taxation methods generally 

allow little flexibility, and cannot be selectively applied or tailored to specific 

needs. Although assessment methodologies are generally more flexible than

taxes, they must reflect direct and special benefit. 

A service fee rate structure can also be augmented by secondary funding 

mechanisms and altered by modifications to tailor the cost allocation to the local 

situation. For example, many stormwater utilities use credits to recognize on-site 

control systems or activities that reduce the public expense of stormwater 

management. Such credits can be creative. The City of Griffin, Georgia 

negotiated a service fee credit with the local school district. The district agreed to 

teach an environmental education program that satisfied most of the City’s 

NPDES permit public education mandate. Mecklenburg County (Charlotte), 

North Carolina offers a partial service fee credit to industrial properties that have 

their own NPDES permits. 

Balance of Rates with Level of Service 

A general legal standard for a utility service fee rate structure is that it must be 

fair and reasonable. The resultant charges must bear a significant relationship to 

the cost of providing services and facilities. The balance between rates and 

service levels does not have to be precise or perfectly consistent. If significant 

differences in service levels prevail over time, however, a rate structure should 

reflect the variance to a reasonable degree. This can be accomplished in several 

ways. The rate structure itself might be altered in some way. The rate charged 

 2-27 
per equivalent unit of the service might be reduced or increased. A modifying 

factor or surcharge might be applied to the basic rate to reflect a lower or higher 

service level provided to a specific geographical area or customer group. 

Data Requirements 

The data requirements of various rate structures differ, sometimes significantly. 

Two general rules usually prevail: 1) new data costs more than existing data; and 

2) each additional increment of precision costs more than the previous one. As a 

result, many communities prefer to use existing data and apply a rate structure 

that is relative simple and gross. The number of parameters necessary to 

calculate a service fee for each customer is an important cost consideration, but 

it is not necessarily less costly to use a single parameter rather than two or more. 

If complete and accurate data is readily available from an existing source, it does 

not necessarily cost more to assemble a master account file based on a more 

precise parameter or several parameters, though that is usually the case. 

Industry standards for stormwater service fee rate structures have coalesced 

around a few data parameters that have a demonstrated relationship to the cost 

of stormwater services and facilities. Impervious area is a common parameter, 

not only because it is closely related to runoff rates and pollutant loadings but 

also because many communities already have that data in the form of planimetric 

polygons defining building footprints, paving, etc contained in their geographical 

information systems. If, however, the data is available only as line definitions 

and not in closed polygons, the polygons have to be created to measure the 

area. This may involve interpreting satellite imagery, aerial photographs and

property line maps, and may make impervious area a more expensive parameter 

to implement. In some cases, an algorithm can be applied to the line segment 

data to join segments into polygons that can be measured, but that approach 

requires a significant amount of quality assurance review. 

The data requirements associated with implementing and maintaining a 

stormwater service fee depend more on the subtleties of the rate methodology

and the use of modifying factors than on the basic parameters selected. If an 

impervious area method were to be applied to all properties individually, 

impervious area information would have to be generated for residential as well as 

non-residential parcels. However, if a simplified residential service fee is utilized, 

data requirements and costs might be reduced by as much as 70 percent 

regardless of the type of rate methodology employed. 

Implementation costs of a tiered residential rate structure are usually higher than 

for a single flat-rate residential service fee. A two-tier or three-tier simplified rate 

structure for residences requires some additional analysis of the residential 

housing stock subject to the charge. If information available from other 

databases could be used to determine the proper assignment of residential 

properties to different tiers, the impervious area of individual properties would not 

have to be carefully measured. However, experience has shown that grouping 

 2-28 
residential properties is only slightly less demanding than precisely measuring 

the impervious area on each property. 

The cost of implementing an impervious area rate structure is a function of the 

number of properties that must be measured, the accuracy standards adopted for 

data, and the measurement technique employed. Techniques available for 

determining the impervious area and gross area of individual properties range 

from very time-consuming and expensive on-site measurements to 

photo-interpretive methods using scaled aerial photographs or satellite imagery. 

Cost of developing impervious area data has ranged from less than $1 to over $6 

per unit, depending primarily on whether or not a simplified residential rate is 

used. 

Accuracy standards also influence the cost of both initial implementation and 

subsequent data maintenance. Use of an equivalency unit for grouping 

properties into ranges subject to a rate schedule allows less exacting data 

standards to be used without diminishing the percentage of properties that are 

correctly charged according to the rate schedule. Automating the maintenance 

of the data file can significantly reduce the on-going administrative expense. If 

building permit applicants are required to provide impervious area coverage 

figures, the information can be transferred directly to a service fee master 

account file. 

Some counties and cities use both gross and impervious area or gross area and 

a second data parameter reflecting the intensity of development (percentage of 

imperviousness) instead of the actual impervious area. These approaches 

involve two parameters, but do not necessarily increase the cost of 

implementation and upkeep if the required data is readily available from existing 

sources. Intensity of development can be interpreted relatively quickly and 

cheaply for each property, and properties can be assigned to general categories 

instead of assigning unique development intensities to each one. 

A mistake sometimes made by cities and counties when they first adopt a rate 

structure is to use a parameter simply because they have an existing database, 

not because it correlates with the cost of stormwater services and facilities. For 

example, at least a few cities and towns have used water meter size or even 

water use as a stormwater service fee parameter, simply because the data was 

readily available. This can lead to serious problems if the stormwater rate 

structure is challenged in court because there is little if any correlation between 

such factors and the cost of providing stormwater management. 

Compatibility with Data Processing Systems 

The cost of implementing and applying a stormwater utility service fee includes

the work required to assemble a master account file comprised of customer 

names and the data required to calculate a billing. A master account file must 

also be linked to or integrated in some manner with a billing system that enables 

 2-29 
the service fee to be delivered to the proper party, payments received and 

processed, and proper accounting to be performed. All of these typically involve 

extensive use of a computer data processing system and one or more 

databases. 

Degree of compatibility of a preferred service fee rate methodology with existing 

databases and data processing systems directly influences the cost of long-term 

maintenance and operation of utility funding. Service fee billing, collection, and 

accounting costs are often less if a stormwater charge can be added to an 

existing system rather than creating a new means of delivering the billing and 

processing payments. 

A majority of city stormwater utilities bill their service charges on water, 

wastewater, solid waste, electric, gas, and other municipal utility service bills. 

Many counties are primarily rural service governments that do not operate such 

utilities, so another approach is needed. Most counties have local property tax 

assessment, billing, and collection responsibilities. Therefore, county stormwater 

utility service fees in some states are added to their property tax billings. Some 

counties have opted to prepare separate service fee billing systems so as to

avoid any confusion between property taxes and stormwater service fees. 

Special service districts either integrate the master account file and billing with 

existing water, wastewater, or other billing systems or, in some states, they are 

able to attach stormwater billing to a county or city property tax billing. 

Consistency with Other Local Funding and Rate Policies 

Most urban communities have a variety of funding mechanisms in place and 

adopted policies that portray local practices. If, for example, a community has 

water and sewer service fee rate structures that use residential flat rates, a 

simple residential stormwater fee would probably be very acceptable. If, 

however, local water and sewer rates are very complex, the general public’s 

expectations are likely to be geared to that level of refinement. A flat-rate 

stormwater service fee for all residential properties might not be perceived as

sufficiently accurate. 

Revenue Stability and Sensitivity 

Fortunately, stormwater service fee rate structures are not prone to some of the 

revenue stability and sensitivity problems of water and wastewater (sewer) 

methodologies. Stormwater costs and rates are generally associated with 

providing and maintaining a provisional system capacity that is fully utilized only 

infrequently, rather than with delivering a certain amount of water or collecting 

and treating a relatively consistent quantity of wastewater each day. As a result, 

the revenue stream of a stormwater service fee is not susceptible to conservation 

measures like water and wastewater utilities. Stormwater utilities do not have to 

increase rates as a result of customers reducing their consumption of a 

commodity like potable water. 

 2-30 
SERVICE FEE RATE AND ASSESSMENT METHODOLOGIES

Rate Design 

Conventions are emerging as stormwater utility service fees and assessments 

become increasingly common. Impervious area, gross area, percentage 

imperviousness, and land use are the most frequently used parameters. 

Service Fees 

In most instances, service fees are cost-based, i.e., they are designed to reflect 

the impacts that each property has on stormwater service demands and thus the 

cost of providing facilities and operational and support activities. Such costs are 

primarily a function of peak stormwater runoff rate, total volume of discharge, and 

pollutant contributions, but design practices for stormwater service fees and 

assessments have yet to settle upon a single common standard or even a 

generally-accepted best model for calculating charges. 

Empirical studies have demonstrated that impervious surface area on a property 

is the single most significant factor influencing all of these impacts. Impervious 

area is also relatively easy to identify and quantify numerically and is the most 

common parameter used in stormwater service fee calculations. However, the 

impact of a given area of impervious surface may also be influenced by its 

shape, slope, surface condition, vegetation, and nature of its discharge to a 

conveyance conduit or channel. 

Location of impervious and pervious areas on a given site is also important in 

determining the degree of runoff mitigation that results due to the presence of 

pervious areas. Runoff from an impervious parking area draining across a broad 

grass slope of permeable soil to a roadside ditch may be significantly less 

compared to that of a similar impervious area collected and drained by storm 

sewers. This has led some to focus on “directly-connected impervious area” in 

their stormwater rate structures. 

Percentage of imperviousness is also significant because pervious surfaces may 

mitigate runoff impacts from a given property. Relatively few stormwater service 

fee methodologies employ impervious percentage directly in the calculation of 

service fees, but it is indirectly accounted for in methodologies that use a 

combination of gross area and impervious area or gross area and intensity of 

development. 

Permeability of soil and vegetative conditions may also influence the mitigation 

effects attained from pervious areas. However, soil and vegetative conditions 

are rarely considered because they can vary dramatically, even across a single 

site. There are very few reliable and accurate soil inventories, soil conditions 

may be altered in the course of development, and vegetative effects vary 

significantly from season to season. 

 2-31 
Assessments 

Modern urban stormwater benefit assessment parameters are different than 

those employed in earlier times. Stormwater assessments were historically 

derived from ditch law practices applied to drainage and protection of agricultural 

areas. Since agricultural income was closely tied to the area protected or 

improved by the drainage practices, property area was the most common 

parameter for apportioning the benefit and impervious area was not a common 

consideration. Because the systems subject to drainage and ditch law 

assessments were geographically and functionally limited, built to protect acres 

owned by relatively few farmers, assessments would typically be based on 

acreage each owned. In later periods, property value was often used as the 

parameter for assessment calculations. 

In contrast, the service area of modern urban stormwater districts or utilities is 

typically much larger with thousands of properties and owners. In addition, urban 

stormwater management may not always have a distinct benefit that is direct and 

special to individual properties. Therefore, use of the special assessment 

process for urban drainage projects must carefully evaluate area to be served, 

benefit to be provided, and relationship of benefit to individual parcels which 

might be assessed. Present-day assessment calculations are frequently based 

on parameters similar to those employed for stormwater service fees, i.e., 

impervious area, gross area, and development intensity. Additional discussion of 

this topic is included in the section covering Special Assessments in this chapter. 

Uniform and Tiered Charges 

A majority of rate structures currently in force employ uniform (flat-rate) or tiered 

fees for some or all customers rather than a calculated charge based on 

conditions on each property. The most common form is a flat-rate for detached 

single-family residential properties, coupled with discrete rates applied to nonresidential properties. Two or three tiers of residential rates are common in 

communities that have a diverse housing stock. Some rate methodologies also

apply uniform or tiered rates of various sorts to other classes of customers. For 

example, individual mobile home parks, condominiums and townhouses are 

sometimes billed flat rates per unit. 

Rate structures that classify and group properties by development intensity or 

land use and apply a fixed rate to the classes are a form of tiering. For example, 

gross area/intensity of development rate structures commonly group properties 

into five to ten descriptive classes ranging from undeveloped or very lightly 

developed to very heavily developed. Such rate methodologies also typically

group customers into gross area increments, so dual tiers of area and 

development intensity are used in the fee calculation formulae. A few 

communities have adopted very simple rate structures that charge residential 

properties one flat rate and all other properties another. Given the diversity of 

non-residential development conditions, this approach does not attain a high 

degree of equity in apportionment of costs of service. 

 2-32 
Service and Equivalency Units 

Many communities have opted to use various service units or equivalent unit 

values in their utility rate methodologies. For example, water rates are often 

based on metered use of gallons or cubic feet of water, which are units of 

service. Solid waste charges are frequently based on service units such as the 

size and number of bins or the tonnage of waste dumped at a transfer station. 

Stormwater service units or equivalency unit values are usually based on 

impervious area or gross area, and are most commonly derived from the typical 

or average condition on a single-family residential property. Terms like 

“equivalent residential unit” or “equivalent service unit” are commonly used to 

describe these values.

Service units or equivalency units are typically applied as “block charges”, where 

customers are billed for increments of use. Water customers may be billed in

increments of 1000 gallons or 100 cubic feet, rather than for a precise number. 

Such practices have been adapted to stormwater service fees. For example, 

Columbia County, Georgia uses an impervious area stormwater rate structure 

and charges each customer a fixed rate for each 100 square feet of impervious

coverage. 

Some communities have opted to use a combination of flat rates for single-family 

residential customers with an equivalency unit applied to other types of 

properties. For example, an average residential property in a given community 

might be determined to have 3,000 square feet of impervious area (including 

roofs, drives, walks, patios, etc), and this value might be used as a service or 

equivalency unit for other customers. All single-family residential properties 

might be charged for one equivalent unit, or two or more tiers of that increment 

might be applied to residential properties. The impervious area on other types of 

properties would be measured and that figure divided by 3,000 to determine the 

number of equivalent units that each should be charged. It is common practice 

to bill for each equivalent unit or fraction thereof, effectively rounding up to the 

next full unit. 

Water and sewage rate structures often include increasing or declining fee 

schedules to encourage or discourage consumption, in which incremental 

“blocks” are defined. For example, in water and sewer rates the first 10,000 

gallons used or discharged in a month would be charged at one rate, the next 

10,000 gallons at another, and so on. This practice is not common in stormwater 

rates, though a few jurisdictions that bill undeveloped as well as developed 

properties employ declining rates to moderate the charges on large undeveloped 

tracts of land. 

One of the benefits of a service or equivalency unit value is that it allows easy 

comparisons of charges among dissimilar customers. For example, under the 

assumptions used in describing an impervious area rate methodology previously, 

a commercial or other non-residential property with ten times as much 

 2-33 
impervious area as a typical residence (assumed to be 3,000 square feet) would 

be charged for ten units of use. A “big-box” retail store (or small shopping center 

or industrial site) with 600,000 square feet of impervious coverage (about 

fourteen acres) would be billed for 200 units. 

Classification and Grouping of Like Customers 

Classification and grouping of like customers having similar characteristics and/or 

service demands is a common practice in utility service fee rates. For example, 

wastewater treatment demands and costs are related not only to the volume of 

the waste to be treated, but also to the type of constituents found in the 

wastewater and their strength or concentration. Some users discharge wastes to 

public sewers that are radically different than a typical residence. Therefore, 

wastewater rates for some commercial and industrial customers may include 

both a volume component and a strength component. 

This particular wastewater rate practice has not been directly adapted to 

stormwater rates, but a comparable classification or grouping of like customers 

based on their impacts on stormwater services and facilities has been 

incorporated into some rate structures. For example, all single-family detached 

residential properties are often grouped in a single user class or into tiers and 

each class is then billed a common rate. In a gross area/intensity of 

development rate methodology, properties having like land use may be grouped 

in a single intensity of development classification, e.g., all commercial office 

properties might be deemed heavily developed for rate calculation purposes. 

Industrial properties or those undergoing land disturbance activities might be 

grouped for NPDES impacts and erosion/sediment control service demands. 

Service Fee Credits 

Many communities have modified basic stormwater rate design practices to 

accommodate local circumstances. Perhaps the most widely-used modification 

to basic rate structures is application of a credit adjustment to service fees. 

Credits are typically conditional, i.e., they are premised on continuing specified 

performance by the customer. If the specified performance is not maintained, 

credits may be rescinded. The concept is similar to industrial pre-treatment 

credits commonly provided wastewater customers to reduce strength of sewage 

discharged into public systems. 

Stormwater service fee credits are most commonly provided for properties that 

have on-site detention or retention facilities. In most cases detention or retention 

systems are designed to approximate pre-development conditions or to meet 

capacity limitations of downstream facilities. Such controls reduce capacity 

requirements (and cost) of downstream systems and may, if properly designed 

and maintained, enhance water quality. Credits have also been given for 

facilities or activities that assist in provision of services or reduce the public cost 

of providing services. 

 2-34 
Credits have also been adopted in some jurisdictions for properties subject to 

and in compliance with National Pollutant Discharge Elimination System 

(NPDES) permits and for public and private schools providing approved water 

quality education programs. The rationale for the latter credit is that education is 

a minimum control measure in NPDES Phase 2 stormwater discharge permits. If 

not provided by local schools educational programs the service would have to be 

performed by the stormwater management entity at additional cost to the 

ratepayers. 

Various means are employed to provide service fee credits to properties having 

on-site detention. For example: 

3⁄4 Boulder, Colorado, for properties providing on-site detention, has 

administratively adopted the practice of reducing the normal service fee 

twenty (20) percent for an on-site detention system that meets standards 

for a 5-year storm. Systems that meet 100-year storm requirements are 

eligible for an eighty (80) percent reduction. 

3⁄4 Bellevue, Washington changes the intensity of development classification 

of properties with detention systems to that of very lightly developed land, 

resulting in a variety of percentage reductions, depending on the intensity 

of development classification that would normally be applied to the subject 

property. 

3⁄4 Charlotte, North Carolina allows up to fifty (50) percent credit for peak 

runoff attenuation and up to twenty-five (25) percent credit for flow volume 

reductions. 

Practices elsewhere reduce service fees between thirty-three (33) percent and 

seventy-five (75) percent in recognition of on-site control that reduces runoff 

rates. In most situations the long-term impact on revenue resulting from this type 

of adjustment is minor, typically no more than one or two percent. Ratepayers 

who do not have on-site systems have to pay slightly more to cover the minor 

deficit resulting from the credits. 

The primary intent of credits is to recognize reductions in the cost of public 

stormwater services and facilities that can be attributed to private systems or 

activities. Credits only partially compensate developers who install and properly 

maintain facilities. Rarely do they offset loss of space such facilities occupy or 

the degree to which on-site systems disrupt the layout of commercial properties 

and subdivisions. Nor do most credits consider water quality impacts of on-site 

systems, or their influence on the cost of stormwater quality management. 

However, they do marginally improve equity of service fee cost allocations. 

The balance of fees with level of service required and provided is, at least in 

theory, improved by use of credits. On-site control of peak flow of stormwater 

 2-35 
runoff means that a property requires less service from the public stormwater 

system. Downstream reductions in peak runoff allow a higher level of service 

from a given size of facility or enable a community to build smaller systems in the 

future. A reduction in pollutant discharges into the public system could translate 

into lower NPDES permit compliance costs. 

Developers’ engineers can provide the information required to incorporate a 

credit for on-site measures. An allowable runoff release rate based on 

pre-development conditions and required on-site storage capacity can be used to 

determine the effectiveness of each on-site facility for crediting purposes. 

Example Stormwater Rate Methodologies 

The rate structure concepts used as examples in this guidance are typical of 

those adopted in the more than five hundred communities that have established 

stormwater utilities or special districts. Direct comparison with rate 

methodologies used in specific communities is not productive, however, since the 

general approaches examined in this guidance should be viewed in the specific 

context of the local needs, priorities, and circumstances of each community. 

Generally speaking, any rate methodology that incorporates gross area tends to 

reduce the proportion of the service costs allocated to commercial and other 

intensely developed properties and increase the proportion of costs assigned to 

residential and less intensively developed properties. 

Example stormwater rate methodologies examined in this guidance base 

stormwater fees on: 

3⁄4

3⁄4

3⁄4

3⁄4

impervious area; 

a combination of impervious area and gross area; 

impervious area and the percentage of imperviousness; and 

gross property area and the intensity of development. 

Impervious Area 

Stormwater rate structures based solely on impervious area have been widely 

used. They are simple, the concept is easily understood by the general public, 

and is generally perceived as equitable. Impervious area rate methodology 

reflects a philosophy of allocating costs based on each property’s contribution of 

runoff to the system. Large expanses of roofs and paving in shopping centers 

and other commercial and industrial business areas are highly visible to the 

general public, and most people understand the hydrologic impact of covering 

natural ground with paving and rooftops. The approach is generally consistent 

with local service fee rate practices for wastewater services, wherein fees are 

 2-36 
based on the amount of water used and strength of effluent discharged to the 

public treatment works. 

Numerous technical studies, references, and citations in engineering literature 

technically validate the equity of an impervious area rate methodology. The 

coefficient of runoff value in hydrologic engineering tables closely approximates 

the percentage of impervious coverage. Empirical evidence gathered in the field 

by monitoring changes in runoff before and after development verifies that 

impervious coverage is the key factor influencing peak stormwater runoff. Data 

gathered during the National Urban Runoff Program (NURP) in the 1970’s and 

1980’s and subsequent research showed that impervious area is the most 

dominant factor in pollutant loadings conveyed by stormwater runoff. 

The impervious area approach may introduce a “timing” problem in the 

acquisition of capital assets. Impervious area service fees typically are 

applicable only to developed properties, but stormwater capital improvements are 

designed to accommodate future growth. Present ratepayers may be paying for 

capacity provisions far beyond their own use, and undeveloped properties (not 

subject to an impervious area fee) would not be charged for their future needs. 

Other funding mechanisms, such as development impact fees or system 

development charges, can be used in concert with an impervious area rate 

methodology to ensure that undeveloped properties ultimately participate in the 

cost of capital improvements designed with capacity to serve them. 

An impervious area rate methodology is highly stable and insensitive to property 

alterations by ratepayers. The rate of revenue growth using an impervious area 

methodology would more or less correspond to the pace of development. 

Economic downturns would tend to diminish the addition of new impervious area 

and the stormwater revenue growth, while rapid growth would add to it. 

Reductions in impervious coverage on individual properties are rarely justified 

merely to reduce stormwater fees. Alterations that would reduce stormwater fees 

are essentially infeasible under all the rate structure scenarios examined in this 

guidance. 

Most impervious area rate structures include simplified single-family residential 

service fees, often applied as flat-rate charges. Charges to non-residential 

properties may be structured in a variety of ways under an impervious area 

methodology. In some cases the single-family residential property, “equivalent 

unit” value, or ranges of impervious area (100, 500, or 1,000 square feet) are 

used as a billing unit. 

Impervious area service fees are usually calculated by dividing the amount of 

impervious area on each parcel by an equivalent unit or a range value to 

determine the number of billing units and multiplying a charge per unit. Very few 

use the exact amount of impervious area on each property because the accuracy 

 2-37 
of the impervious area data typically available does not support such a precise 

calculation.

The following example illustrates how service fees based on impervious area 

might be calculated. Assume that a typical single-family residential property is 

determined to have 3,000 square feet of impervious area including driveway and 

patio area as well as roof coverage. An annual rate of $.02 per square foot of 

impervious coverage would result in a typical residence being charged $60.00 

per year, or $5 per month. 

If a flat-rate fee were applied to all single-family residences, an equivalency value 

equal to the impervious area of the typical single-family residence might be used 

to determine charges to other properties, including multi-family apartments. The 

3,000 square foot increment might also be used as a range value in the rate 

structure, with all non single-family residential properties grouped into impervious 

area ranges of 3,000 square feet which serve as a billing unit. 

All properties in a given range are typically charged the same fee even though 

they might have slightly different impervious area. For example, using an 

equivalency unit of 3,000 square feet of impervious coverage, two commercial 

properties with 21,000 square feet of impervious area would be charged for 

seven equivalent units (7 X $60 = $420/year) even if their gross property areas 

differed. A large shopping center or discount store with 600,000 square feet of 

impervious coverage would be charged $12,000. 

An impervious area rate methodology is not highly flexible or subject to judgment 

in its application to specific properties. It is based on a single parameter that can 

be accurately measured, although modifying factors might be applied to the basic 

rate calculation. Approaches based on parameters like intensity of development 

allow substantially more judgment to be applied, both in the design of the rate 

methodology and in its application to specific properties. 

Other funding mechanisms can be blended with an impervious area service fee. 

For example, a system development charge could be adopted to recapture a 

system capitalization component from properties as they are developed. Other 

revenue sources can be used to supplement service fees, such as general 

revenue support for an NPDES stormwater quality program. 

Impervious Area and Gross Area 

Both total property area (gross area) and impervious coverage of properties 

influence amount, peak rate, and make up of stormwater discharged to public 

drainage systems. A combined impervious area and gross area rate 

methodology can account for both factors. Most stormwater rate methodologies 

utilize one or the other parameter in calculation of fees. A few (including Denver, 

Colorado) use both parameters to derive percentages or ratios used in rate 

calculations. 

 2-38 
The concept underlying an impervious/gross area rate methodology is relatively 

easy to explain and grasp. It is consistent with the public's general 

understanding of hydrology and the impact that both gross area and impervious 

coverage have on stormwater runoff. This type of rate methodology tends to 

allocate more of the cost burden to lightly developed and undeveloped properties 

than methodologies that are based strictly on impervious area. Depending on 

the weighting factors and/or cost allocations, however, smaller properties that are 

almost entirely covered with impervious surfaces could conceivably be charged 

more than larger properties that are undeveloped or very lightly developed with 

little impervious coverage. 

An impervious/gross area rate methodology requires that the mix of impervious 

and gross area in the service fee calculation be “tuned” to properly reflect the 

significance accorded to each parameter. This can be achieved in at least two 

ways: 1) by applying weighting factors to gross and impervious area; or, 2) by 

allocating certain costs of service to each parameter. Weighting assigned to 

gross and impervious area should be consistent with the local hydrologic 

conditions, patterns of development, program requirements (e.g., operating 

versus capital needs), balance of stormwater quantity and quality program costs, 

and the community's perceptions. 

Rates could be structured in a variety of ways under this approach to reflect the 

importance assigned to each parameter. Units of gross area might be charged a 

basic rate, with a surcharge applied to units of impervious coverage. 

Alternatively, cost of service might be apportioned between impervious area and 

gross area instead of assigning specific costs to each parameter. For example, 

eighty (80) percent of total stormwater cost of service might be allocated to 

impervious area and twenty (20) percent to gross area. 

Coefficients of runoff used in hydrologic engineering suggest that gross area to 

impervious area ratios in a service fee calculation might be as low as 1:4 or as 

high as 1:40. If costs are allocated to the two parameters, the significant 

influence of impervious coverage on peak runoff and pollutant loading suggests 

that seventy-five (75) percent or more of the costs should be assigned to the 

impervious area component of the rate. 

Solely for the purpose of illustrating how fees might be calculated using an 

impervious/gross area methodology, assume that each 100 square feet of gross 

area might be charged $.10 (ten cents) per year. A surcharge of $1.60 per year 

might be applied to each 100 square feet that is covered by impervious area. 

This would yield an effective ratio of 1:17 between areas that are pervious and 

those that are impervious (i.e., areas covered by impervious surfaces would be 

charged seventeen times as much as areas that are not). That ratio is generally 

consistent with the difference in peak runoff between undeveloped and 

developed properties. 

 2-39 
Applying the example values cited above to a twelve thousand (12,000) square 

foot residential property with 3,000 square feet of impervious coverage would 

result in a total service fee of $60 per year or $5 per month. The charge for the 

gross area of the property (12,000/100 @ $.10 = $12/year) would be added to 

the charge for the impervious coverage (3,000/100 @ $1.60 = $48/year). An 

undeveloped 12,000 square foot property would be charged $12/year in this 

scenario. 

Applying the same values to a small commercial property of 30,000 square feet 

having 21,000 square feet impervious (70 %), the annual service fee would be 

$366 per year (30,000 sq ft / 100 x $0.10 = $30/year for the gross area and 

21,000 sq ft / 100 x $1.60 = $336/year for the impervious coverage). Thus, the 

stormwater service fee would be more than six times as much as that for the 

example 12,000 square foot residential property even though the example 

commercial property is only two and one-half times larger in gross area. The 

proportionately greater increase reflects more intense development of the larger 

parcel in this example (70 % impervious coverage versus 25 % for the residential 

example). 

Using the same formula, if it is assumed that a 600,000 square foot shopping 

center is completely covered with impervious rooftops and paving, the annual 

service fee would be $10,200 (600,000 sq ft / 100 x $0.10 = $600 for the gross 

area plus 600,000 sq ft / 100 x $1.60 = $9,600 for the impervious coverage). In 

both commercial examples cited, the gross area/impervious area rate 

methodology results in slightly lower fees for the non-residential properties than 

does the impervious area methodology examined previously, but that is purely a 

function of assigned values and is subject to modification. 

A gross area/impervious area rate methodology facilitates charging undeveloped 

properties a service fee. Charging undeveloped properties would broaden the 

rate base, especially if extensive rural areas were included in the utility service

area. It would also enable some operating and capital expenses to be distributed 

among all properties, although system development charges or other funding 

methods to recapture financial participation in infrastructure capitalization may 

still be needed. Using the above example values, an undeveloped 12,000 

square foot property might be charged $ 12 per year (12,000 sq ft / 100 x $0.10), 

an undeveloped 30,000 square foot property would be charged $ 30 per year 

(30,000 sq ft / 100 x $0.10), and an undeveloped 600,000 square foot would be 

charged $600 per year (600,000 sq ft / 100 x $0.10). Because charges to very 

large undeveloped acreages quickly escalate, such rate methodologies might

need to have a schedule of incrementally declining charges as the size of 

properties increases. 

A residential flat-rate charge could also be used with this methodology, using a 

sample of residences to determine how much gross and impervious area is 

 2-40 
typical in a given community. The residential rate could constitute equivalent unit 

values for both parameters. Obviously, different rates for gross area and 

impervious area might be applied in all of the above examples to meet the cost of 

services and facilities or apportion costs differently. 

Both gross area and impervious area data are needed for this methodology, 

adding to the cost of developing a master account file, although fee calculations 

could be relatively simple. The gross area on each property might be divided by 

a billing unit increment (100 square feet in example above) and multiplied times a 

charge per unit. The same could be done for impervious area, with the two 

sub-totals added together to generate service fee amounts. Adjustments and 

credits might be applied to either or both of the parameters. 

Cost of implementation and upkeep of this type of rate methodology is influenced 

by the cost of assembling data for a master account file and the computer 

programming associated with billing/collection and billing inquiry processes. 

Using a flat-rate charge for one or more classes of properties would substantially 

reduce costs. Maintenance of information might also be simplified by requiring 

data from developers' engineers and/or architects when plans are submitted. 

Potential revenue capacity of this type of rate structure is somewhat greater than 

the impervious area approach because it could conceivably charge both 

undeveloped and developed properties. For the residential component, the 

revenue stream would probably be equal to or greater than other methods 

described in this guidance, depending on weighting factors and rates assigned

and/or allocation of costs. 

This approach is comparable to the other rate structure options in its stability and 

insensitivity to external influences. Being based on gross area and impervious 

area, there is little that can be done by a property owner to reduce parameters 

that drive the amount of the service fee. 

Applying weighting factors or allocating costs to gross area and impervious area 

makes this approach especially flexible. A broad range of weights could be 

assigned to gross area and impervious area to account for unusual conditions,

presence of modifying considerations like on-site detention or water quality 

impacts, or runoff mitigation normally realized on large undeveloped tracts. 

System development charges and other secondary funding methods could also 

be coordinated with parameters used in this type of rate structure. 

Impervious Area and Percentage of Impervious Coverage 

This type of rate methodology is currently used by the City/County of Denver, 

Colorado. Under this rate structure amount of impervious area and impervious 

percentage are both used to calculate service fees, dictating that data on both 

impervious and gross area be used. Gross area is not relevant to the service fee 

calculation, except that it is needed to determine the percentage of 

 2-41 
imperviousness. Under this approach impervious area of each property is 

charged at varying rates depending on the percentage of imperviousness of the 

subject property. Each square foot of impervious area is typically charged more 

as the percentage of imperviousness increases. Because this rate methodology 

is based on impervious area, undeveloped lands are often not charged. 

Some anomalies may occur in service fees that result from this type of rate

methodology. Consider two properties of different sizes with the same amount of 

impervious coverage. Because its percentage of imperviousness could be a lot 

higher, the smaller property could be charged more than the larger property. 

The key determinant of charges to individual properties (and of overall revenue 

capacity) under this rate concept is the schedule of charges per unit of 

impervious coverage. Properties may be divided into several classes based on 

their percentage of imperviousness (referred to as “ratio groups” or 

“imperviousness classes”), and a varying rate per impervious area unit might be 

applied to each class. For example, properties having ten (10) percent 

imperviousness or less might be charged $.06 per year for each 100 square feet 

of impervious coverage, while properties with eleven to twenty percent 

imperviousness might be charged $.15 per year for each 100 square feet. 

Proportionately higher values are usually applied as the percentage of 

impervious coverage increases. 

Being based on two parameters which are accurately measurable, impervious 

area and gross area, from which the percentage of imperviousness is calculated, 

this approach gives an impression of greater accuracy than some other options. 

Judgment is introduced to the service fee calculation in the form of different 

charges for various imperviousness classes. 

A community’s perception of equity resulting from this rate methodology may be 

mixed, and may depend on the number of classes or ranges used for percentage 

imperviousness and schedule of rates assigned to them. To the extent that a 

shift in the distribution of costs toward heavily developed properties benefits 

single-family residences, homeowners would likely see a lower bill than under 

other rate structures. They might view the balance of services and charges 

favorably. However, charges for intensely developed commercial properties 

would not be as favorable as they would bear a much higher proportion of cost of 

service. 

Table 2-1, below, presents a schedule that is typical of what might be applied 

under this approach. 

 2-42 
Table 2-1: Example Schedule of Rates 

(per 100 square feet of Impervious Coverage) 

Impervious Percentage Annual Rate/100 Sq. Ft. of Impervious 

Area 

1 to 10 % $.50

11 to 20 % $1.35

21 to 30 % $2.00

31 to 40 % $2.70

41 to 50 % $3.35

51 to 60 % $4.00

61 to 70 % $4.70

71 to 80 % $5.40

81 to 90 % $6.00

91 to 100 % $7.70

A typical residential property has between twenty and forty percent impervious 

coverage. Some houses are much larger but have a much lower percentage of 

imperviousness because they are on very large lots or acreage. Recent trends 

toward very large residential subdivisions with smaller lots and larger structures 

are resulting in much more intense residential development and increased 

stormwater runoff. This is being mitigated to some extent by the use of green 

design practices, such as retention of stormwater in rain gardens and detention 

ponds. 

Both the size and density of residential development are common reference 

points in the design of impervious area/percentage of impervious area 

stormwater rates. An average residence in an urban community might have a 

12,000 square foot lot and 3,000 total square feet of impervious area (25 %) 

including driveways and patios. When an impervious area/percentage of 

impervious area methodology is used, an annual service fee for such a residence 

under the example schedules of charges might be $60/year (3,000 sq ft/100 x 

$2), or $5.00/month. The previously-cited example of a commercial property of 

30,000 square feet with 21,000 square feet of impervious coverage, 70 % 

imperviousness, would be billed $987/yr under this methodology with the 

schedule of rates shown in the table (21,000 sq ft/100 x $4.70 = $987). The 

600,000 square foot commercial shopping center example property (100 % 

impervious) would be charged $46,200/yr. (600,000 sq ft / 100 x $7.70 = 

$46,200). 

This example illustrates just one approach to a schedule of rates for different 

percentages of impervious coverage. With the same residential service fee as in 

the impervious and gross area/impervious area rate methodology examples 

 2-43 
($60/year), the service fee both for the small commercial and the large retail 

shopping center would be much greater. It is entirely a function of the rate 

assigned to each range of imperviousness. 

Obviously, care must be taken in designing the schedule of rates to ensure that 

appropriate allocations of cost of service result. It must also be recognized that 

this methodology can create anomalies relative to service fees as compared to 

other rate methods. These calculations are a function of specific schedule of 

rates used in this example and could be changed by adjusting the schedule. 

This rate concept would require that both gross area and impervious area data 

be gathered. Incorporating a simplified charge for single-family residences could 

significantly reduce the number of properties requiring specific data. Future 

maintenance of data for developing properties could be accomplished by 

requiring that gross area and impervious area data is supplied by each 

developer's engineer or architect as part of project plans. 

This approach would require that the file record be larger than for some other 

options in order to accommodate use of two parameters. A rate methodology

could be written to calculate percentage of imperviousness and assign a property 

to a classification, or ratio group, based on the data. Some specialized 

programming might be required for this, but programming expenses would not be 

significantly greater than for other options. 

Revenue capacity of this type of rate structure is greater than most of the other 

options examined in this guidance, especially if a highly progressive schedule is

used. In Denver, Colorado this methodology generates perhaps twice as much 

revenue per square mile as some of the other rate methodologies because the 

very heavy weighting applied to the percentage of imperviousness results in 

much higher charges for intensely developed properties. 

The stability and sensitivity of this rate methodology is consistent with the other 

options considered. Even using a highly progressive schedule of rates, the level 

of service fees would probably not induce property owners to remove impervious 

area from their properties. It simply is not cost-effective for most property owners 

to reduce the impervious area just to reduce a stormwater service charge. 

Despite being based on two parameters, this rate concept retains a fair degree of 

flexibility. Flexibility is directly related to how classes of imperviousness are 

defined and the schedule of rates assigned. By tailoring number and size of the 

classes and schedule of rates, flexibility comparable to the other rate structures 

is achievable. Modifying factors and secondary funding methods such as system 

development charges can also be used. 

 2-44 
Gross Area and Intensity of Development 

Rate structures based on the gross area of each property and its intensity of 

development are currently used by the cities of Bellevue and Tacoma, 

Washington and Cincinnati, Ohio. An intensity of development factor is usually 

very similar to the coefficient of runoff. The term "intensity of development 

factors" is commonly used rather than a "coefficient of runoff", because the 

relationship of intensity of development to stormwater runoff is easily grasped. 

If applied to every parcel, this type of rate methodology requires that gross area 

be determined for all residential as well as non-residential properties and an 

intensity of development rating be assigned to each. Most communities using 

this method have opted to apply a simplified service fee or schedule of fees to 

one or more categories of single-family residential parcels, but there is no 

uniform practice. Non-residential properties are usually categorized into five to 

ten descriptive groups ranging from “undeveloped” to “very heavily developed”. If 

a flat-rate residential charge is not used, all residential properties are typically 

assigned to one or two of the intensity of development categories. 

Local development patterns may influence how residential properties are treated 

under this rate methodology. Only one residential intensity of development 

category might be needed in a community that has highly uniform residential 

development. More categories might be appropriate in another community that 

has residential lots ranging from 3,000 square feet to several acres. 

Typically, the intensity of development values range from a low figure ranging 

between .02 and .20 for undeveloped or lightly developed properties up to .85 or 

even .95 for industrial and commercial uses. This approach groups similar 

properties and applies average values to all assigned to a given classification. 

For example, all apartments might be classified as multi-family residential with an 

intensity of development factor equal to .65 instead of assigning individual ratings 

ranging from .50 to .85 to individual apartment developments. The gross area 

parameter is the controlling element of rate calculation for all parcels in a given 

classification. An apartment building on 40,000 square feet of gross lot area 

would usually be billed one-half the amount charged to an equivalent apartment 

building on an 80,000 square foot property. 

Calculation of service fees can be structured in several ways under a gross 

area/intensity of development rate structure. When a simplified residential 

charge is used, the service fee usually compares conditions on non-residential 

properties to a defined average specified for residential properties. For example, 

a typical residence is assumed to have a gross lot area of 12,000 square feet 

and an intensity of development of 0.25, and a commercial property of 30,000 

square feet has an intensity of development of 0.70. The commercial property 

has an area 2.5 (30,000 sq ft/12,000 sq ft) times larger than the residential lot,

and has an intensity of development 2.8 (0.70 / 0.25) times greater. The 

 2-45 
example commercial property’s stormwater charge would, therefore, be seven 

times that of the charge to a typical single family residence (2.5 x 2.8 = 7.0). 

Using the example properties previously cited, the 12,000 square foot residential 

property assigned an intensity factor of .25 would be charged $5/month or 

$60/year (12,000 sq ft x 0.25 / 100 x $2.00/sq ft = $60/year). The 30,000 square 

foot commercial property with 21,000 square feet of impervious coverage 

assigned an intensity factor of 0.70 would be charged $35/month or $420/year 

(30,000 sq ft x.70 / 100 x $2.00/sq ft = $420/year). A 600,000 square foot 

shopping center property fifty times as large as the single-family residential 

property assigned an intensity of development factor of .90 would be charged 

$900/month or $10,800/year (600,000 sq ft x .90 / 100 x $2.00/sq ft = 

$10,800/year). 

This approach allows service charges to undeveloped as well developed 

properties. For example, Bellevue, Washington assigns a very low intensity of 

development factor to undeveloped lands. It results in service fees that are 

about one-ninth (11 percent) of charges for comparably sized residential 

properties and even a lower percentage when compared with more intensely

developed commercial or industrial parcels. Even at relatively low rates, this 

could generate a substantial amount of additional revenue compared to the 

impervious area rate methodology applicable only to developed properties when 

used in jurisdictions with extensive undeveloped areas. 

The perceived equity of this type of rate structure is normally equal to or greater 

than that of other approaches, but the methodology requires a careful 

explanation to the community. Simplifying terminology associated with the rate 

methodology is desirable. That is why many jurisdictions use a phrase like 

"intensity of development factor". 

Adjustments to individual bills or even entire classes of properties can be 

achieved by reducing or increasing the intensity of development factor for an 

individual parcel or for a class or other grouping. It is common for jurisdictions

using this approach to assign an "effective" intensity of development to individual 

properties in response to service fee appeals, leaving the door open for 

adjustments that achieve a fair and reasonable rate when anomalous conditions 

exist. 

Data requirements associated with this type of rate methodology would be less

than for other options. Gross area information can often be extracted from 

existing databases and/or maps. Assignment of an intensity of development 

factor would require that judgment be used in reviewing conditions on each 

parcel, possibly using aerial photographs. Some additional work would be 

needed in the event that undeveloped properties were to be charged. 

 2-46 
This type of rate structure tends to push a greater proportion of the cost of 

service onto residential and other lightly developed properties than 

methodologies based on impervious area, although the differential has 

diminished as average housing size has increased. Overall revenue capacity

could be increased by also charging undeveloped properties. Like other 

stormwater rate structures examined in this guidance, revenue capacity of the 

gross area/intensity of development approach is relatively stable and insensitive 

to external influences 

Flexibility of an intensity of development rate structure is equal to or somewhat 

better than other methods because of latitude available in defining categories 

and assigning intensity of development factors. A great deal of engineering 

judgment is involved in determining the intensity of development (coefficient of 

runoff) of a parcel in a given situation, and the engineering literature offers rather 

broad ranges of development intensity values. For example, values from .25 to 

.45 are not unusual for single-family residential parcels. 

 2-47 
CHAPTER 3 

LEGAL CONSIDERATIONS

OVERVIEW

The type of funding mechanism selected for a stormwater utility or stormwater 

management program has a variety of legal consequences. Taxes, user fees, 

special assessments, impact fees and other revenue sources can be used, but 

each approach will have different implications in terms of who will pay, what 

procedures must be followed to implement and collect the charge, and how the 

money can be used. If the funding approach is deemed to be a tax, then taxexempt entities such as churches, schools, state agencies and federal 

government facilities will contest their obligation to pay. In many states special 

taxpayer approval must be sought. If a user fee approach is used, the 

reasonableness of the rate structure and its relationship to the service being 

provided may be challenged. If impact fees or special assessments are used, 

there will be limitations on how and where the funds can be applied. 

The distinctions between the various funding approaches are often blurred. In 

general terms, a tax is an enforced burden imposed by sovereign right for the 

support of the government, the administration of law, and the exercise of various 

functions the sovereign is called upon to perform. In some cases there may be 

little practical difference between a tax and a fee, but the legal distinctions 

between the two are important. Many states have constitutional or statutory 

restrictions on the ability of local governments to levy taxes, such as

requirements for special voter approval or super-majority votes in the state 

legislature, which do not apply in the case of fees or charges that are levied by 

the exercise of local regulatory authority. 

State-imposed limits on property taxes have been part of the fiscal landscape for 

decades, but the nature of those limits changed dramatically in 1978, when 

California voters adopted Proposition 13, which rolled back property taxes to 1 

percent of market value and limited annual increases in property values for tax 

purposes. Arizona, Massachusetts, New Mexico and Washington adopted very 

 3-1 
strict limits soon after passage of Prop 13, and Colorado, Missouri, Montana and 

Oregon followed suit. Many states that do not fall under the strict limitation 

category require voter approval for local tax increases, and others require supermajority approval for tax hikes in the state legislature. 

User fees are charges based upon the proprietary right of the governing body 

permitting the use of the instrumentality involved. Such fees have certain 

common traits that distinguish them from taxes. First, they are charged in 

exchange for a particular governmental service which benefits the party paying 

the fee in a manner not shared by other members of society. Second, they are 

voluntary or paid by choice, in that the party paying the fee has the option of not 

utilizing the governmental service and thereby avoiding the charge. Third, the 

amount of the fee is designed to recover the actual cost of the service being 

provided, rather than to raise general revenues for other government purposes. 

The boundary between special assessments and user fees is not always clear. 

Generally, a fee is exchanged for a service rendered or a benefit conferred, and 

some reasonable relationship exists between the amount of the fee and the value 

of the service or benefit, while a special assessment is a specific levy designed 

to recover the costs of improvements that confer local and peculiar benefits upon 

property within a defined area. 

Impact fees are one-time payments from property developers to municipal, 

county or school district governments for off-site improvements necessitated by 

new development. Such fees may be authorized by state enabling statutes or, in 

some states, may be imposed without legislative approval under the general 

home rule or regulatory authority granted by state constitutions and statutes. 

Impact fees differ from user charges in that they typically fund capital 

expenditures, not current services. 

The legality of various funding mechanisms for stormwater management 

programs is primarily a question of state law. This guidance cannot survey or 

analyze the legal implications of different approaches in all 50 states, but it can 

highlight certain common issues that have arisen to date. Careful research will 

be needed to determine an appropriate fee structure in your jurisdiction, which 

will depend on the constitutional and statutory provisions governing the authority 

of local governments and special purpose districts in your state, as well as the 

case law interpreting those provisions. 

For example, City of Wichita, Kansas v. Kansas Taxpayers Network, 874 P.2d 

667 (Kan. 1994) involved the interpretation of certain substantive and procedural 

aspects of the city’s home rule authority under Kansas law. Similarly, in 

Densmore v. Jefferson County, 813 So. 2d 844 (Ala. 2001), the Plaintiffs 

challenged a 1995 state statute as a "local" act (under Alabama state law) that 

had not been properly advertised under the state constitution. The Alabama 

Supreme Court held that the statute had been properly enacted in accordance 

 3-2 
with the applicable state procedures. In Billings v. Nore, 148 Mont. 96; 417 P.2d 

458 (1966), the Montana Supreme Court was called upon to determine, among 

other things, whether a stormwater ordinance enacted by the City of Billings was 

an administrative function or a legislative action that could be subject to repeal by 

special voter initiative under Montana law. 

Stormwater management program fees have been the subject of litigation 

resulting in reported opinions from at least 17 states, including many cases 

involving final decisions by the state’s highest court: 

 

o Montana – 1966 

o Colorado – 1986 and 1993 

o Kentucky – 1989 and 1996 

o Ohio – 1990 

o Oregon – 1992 and 1993 

o Kansas – 1994 

o Florida – 1995, 1998 and 2003 

o Washington – 1997 

o Virginia – 1998 

o Tennessee – 1998 

o Michigan – 1998 and 2001 

o North Carolina – 1998 and 1999 

o South Carolina – 1999 

o Alabama – 2001 

o California – 2002 

o Georgia – 2004 

o Illinois – 2005 

In addition, there have been unreported decisions from the lower courts in these 

and other states that have involved similar challenges to local stormwater fees, 

for example cases involving the cities of Tacoma and Bellevue, Washington (ca. 

1984); and Atlanta, Georgia (1999). 

In several instances, the results of such litigation have required a legislative “fix” 

to provide the proper authorization for the financing mechanism employed by the 

local stormwater utilities. In the state of Washington, for example, Washington 

RCW 90.03.525 was enacted to impose a stormwater charge on the Washington 

Department of Transportation at a level equal to 30% of the rates charged to 

other landowners. In North Carolina, GS Ch. 153A-277 was enacted in the wake 

of the 1999 state supreme court decision, in order to authorize the collection of 

fees for compliance with federal and state environmental regulations as well as 

for more traditional drainage services. In other cases, the courts have been 

called upon to determine the applicability or legality of existing statutory 

provisions authorizing the creation and funding of local stormwater utilities, such 

as Fla. Stat. § 403.031 and S.C. Code Ann. § 48-14-10. 

 3-3 
COMMON THEMES

Based upon these cases, certain common themes or central issues have 

emerged. The question whether a stormwater service charge is actually a “tax” 

has been the issue most frequently litigated, along with related inquiries into 

whether the charge is actually a special assessment that cannot be levied 

against the parties challenging the fee. Subsidiary issues such as whether the 

charge is reasonably related to the cost of the services provided, and whether it 

is fairly imposed on the properties that are benefited by those services, have also 

been explored. 

Tax vs. Fee 

The most commonly litigated issue is whether a municipal stormwater service 

charge is a valid user “fee” or an impermissible “tax.” This issue has frequently 

arisen in cases brought by tax exempt organizations such as churches, schools, 

and state agencies such as departments of transportation. As discussed in 

further detail below, it is also the central issue when local stormwater fees are 

levied against federal government facilities, which are exempt from local taxation 

but not from the requirement to pay normal utility charges. 

The great majority of recent cases favor the position that stormwater service 

charges are a fee. Such cases continue to be filed because public perception 

has been shaped by the historical fact that stormwater drainage costs have 

traditionally been financed through general revenues, and, as noted above in 

Chapter 2, any new form of government funding is likely to be viewed as a “tax” 

regardless of technical distinctions in the manner in which it is structured. This

phenomenon can be observed in cases such as those from California and 

Michigan where taxpayer groups are the plaintiffs and stormwater utility fees are 

derided as a “rain tax.” In Oregon, where a state constitutional amendment 

(section 11b) defined a “tax” as “any charge imposed by a governmental unit 

upon property or upon a property owner as a direct consequence of ownership of 

that property except incurred charges and assessments for local improvements,” 

the state tax court characterized a city storm drainage fee as follows: 

Respondent’s storm drainage charge is exactly the kind of “johnnycome-lately” charge on property the public anticipated and intended 

to limit. Storm drainage systems are traditional municipal facilities. 

Like city streets, parks, street lights and street signs, storm drains 

are viewed as part of the infrastructure benefiting the public 

generally. Local governments may not avoid the limits of section 

11b simply by calling something a “service” and requiring payment 

of a “fee.” If that were the case, a city could impose a fire or police 

protection fee on all persons using improved property. These kinds 

of serpentine maneuvers, if accepted, would eviscerate the 

constitutional limitation. . . . [S]ection 11b was adopted as an 

 3-4 
initiative measure by angry, frustrated voters. Local governments 

which use sophistry, rationalization and self-justification in an 

attempt to evade the impact of [that section] do their citizens a 

disservice. Roseburg School District v. City of Roseburg, 12 OTR 

329; 1992 Ore. Tax LEXIS 33 (Ore. Tax. Ct. 1992). 

Although this decision was subsequently reversed by the Oregon 

Supreme Court, as described below, it is illustrative of the sentiment that 

continues to inspire protracted litigation on this issue in states across the 

country. 

Found Not to Be a Tax 

Stormwater funding mechanisms have been upheld as valid user fees in the 

cases arising in Kentucky (1989), Colorado, Florida, Washington, Tennessee, 

South Carolina, Georgia and Illinois. 

In Long Run Baptist Ass'n v. Louisville MSD, 775 S.W.2d 520 (Ky. App. 1989), 

the Plaintiffs challenged the constitutionality of a stormwater service charge that 

was based on an "Equivalent Surface Unit" approach (1 ESU for all residential 

parcels; 1 ESU per 2500 sq. ft. for commercial and industrial parcels). The court 

of appeals found that the service charge was not a "tax" and was reasonable and 

uniform in its application. 

In City of Littleton v. State, 855 P.2d 448 (Colo. 1993), the City sought to collect 

unpaid stormwater management fees from state-owned school properties. The 

Colorado Supreme Court found the charge was not a tax or special assessment, 

but a service fee reasonably designed to meet the overall costs of the service 

provided. The court also found that the portion of fee used to construct and 

maintain the drainage system was essential to provision of the services. 

In an earlier case, Zelinger v. City and County of Denver, 724 P.2d 1356 (Colo. 

1986), the Colorado Supreme Court denied a class action challenge to the City 

and County of Denver’s Ordinance No. 160, which dealt with fees and service 

charges assessed for the city’s storm drainage facilities. The plaintiffs claimed 

that the ordinance unconstitutionally denied equal protection and due process 

guarantees to property owners and also contended the ordinance was an 

unconstitutional property tax. The supreme court disagreed and affirmed the trial 

court’s decision that the ordinance was rationally related to a legitimate state 

purpose of financing the maintenance and construction of new storm sewers, and 

that it established a valid service charge rather than an unconstitutional tax 

because the funds raised by the fee were not used for general revenue purposes 

but were segregated and used solely to pay for the costs of the “operation, 

repair, maintenance, improvement, renewal, replacement and reconstruction of 

storm drainage facilities.” 

 3-5 
In Smith v. Spokane County, 948 P.2d 1301 (Wash. App. 1997), the state court 

of appeals found that a fee charged for funding certain "Aquifer Protection Areas" 

was not an unconstitutional tax and would be upheld if it was reasonable and 

designed to cover only the costs of the program. In reaching this decision, the 

court relied upon an earlier Washington Supreme Court decision, in Teter v. 

Clark County, 704 P.2d 1171 (Wash. 1985), which held that charge for a county 

storm and surface water utility was not a tax but a valid regulatory fee. 

In Vandergriff v. City of Chattanooga, 44 F. Supp. 2d 927 (E.D. Tenn. 1998), city 

taxpayers challenged validity of a local stormwater ordinance on various state 

and federal constitutional grounds. The federal District Court found the 

ordinance imposed a fee, not at tax, because the charges were based on use of 

the stormwater system, and applying a portion of fees to construct or expand 

facilities as well as to defray cost of operating the system was explicitly 

authorized by state statute. 

In South Carolina v. City of Charleston, 513 S.E.2d 97 (S.C. 1999), the State of 

South Carolina brought a declaratory judgment action to determine whether city 

was authorized to impose stormwater fees on state facilities pursuant to a state 

statute, S.C. Code Ann. § 48-14-10, which authorized local governments to 

establish a “stormwater utility” and to fund it either through a fee or a tax 

assessment. The City of Charleston created its utility by local ordinance, and 

opted to fund it through a fee. The state argued that although denominated a 

fee, the charge involved was really a tax. The state supreme court found that the 

plain, ordinary and unambiguous language of the statute allowed local 

governments to fund the utility through either a fee or an assessment, and that 

the city had chosen to use a fee, which could properly be imposed on State 

property. 

In McCleod v. Columbia County, 599 S.E. 2d 152 (Ga. 2004), the County 

imposed a stormwater fee based on impervious area of developed property. 

Property owners challenged the fee as an invalid tax. Noting that a charge is 

generally not a tax if it provides compensation for services rendered, the Georgia 

Supreme Court held in a unanimous decision that the fee was "not arbitrary and 

bears a reasonable relationship to the benefits received by the individual 

developed properties in the treatment and control of stormwater runoff." 

An earlier, unpublished decision from the Georgia Superior court, Fulton County

Taxpayers Association v. City of Atlanta, No. 1999CV05897, 1999 WL 1102795 

(Ga. Super. Ct. Sept. 22, 1999), came to a different conclusion. However, the 

City of Atlanta stormwater utility charge, unlike the charge involved in the 

McLeod case, contained no provision for a landowner who has no street frontage 

or a landowner who has his or her own manner of disposing of stormwater runoff, 

such as ponds or other systems, to “opt out” or obtain a credit against the 

stormwater fee. The fee was also struck down because it was similar to a tax 

 3-6 
used to raise money for general purposes. The city did not satisfy the court that 

the funds were dedicated to stormwater and water quality improvements. 

In Church of Peace v. City of Rock Island, 2005 Ill. App. LEXIS 448 (2005), an 

Illinois appeals court found that the stormwater fee levied by the City of Rock 

Island is not a tax and that churches are not exempt from payment of the fee. 

The court found that, under Illinois law, a tax may be distinguished from a fee by 

observing that a tax is a charge having no relation to the service rendered and is 

assessed to provide general revenue rather than compensation. A fee, on the 

other hand, is proportional to a service or benefit rendered. Using this analysis, 

the court found the stormwater service charge was clearly a fee, because there 

was a direct and proportional relationship between imperviousness and 

stormwater runoff, thus creating a rational relationship between the amount of the 

fee and the contribution of a parcel to the use of the stormwater system. The 

court also found that the fee at issue was “voluntary,” because the “opt-out” 

provisions in the ordinance meant that persons choosing not to avail themselves 

of the stormwater drainage system provided by the city could do so and avoid 

paying the fee. 

Found to Be a Tax 

Stormwater fees have been struck down as invalid taxes requiring explicit voter 

approval under specific state laws or constitutional amendments (“taxpayer 

rebellion” provisions) in California and Michigan, and were also rejected in two 

lower court decisions interpreting a similar provision in Oregon before the later of 

those decisions was reversed by the Oregon Supreme Court. 

In Howard Jarvis Taxpayers Ass'n v. City of Salinas, 98 Cal. App. 4th 1351 

(2002), the City established a storm drainage fee on all developed property, 

based on impervious area. Taxpayers challenged the fee as a "property related" 

fee requiring voter approval under the Article XIII.D of the state constitution, 

which was added in the 1996 elections as a result of Proposition 218, the “Right 

to vote on Taxes Act.” The trial court found that the fee met an exception in the 

constitutional provision for “water and sewer services,” but the appellate court 

reversed because the fee was not directly based on or measured by use. 

In Bolt v. City of Lansing, 587 N.W.2d 264 (Mich. 1998), the City established a 

stormwater fund to pay for sewer separation costs, based on an "equivalent 

hydraulic area" formula. The Appeals Court (1997) found it was a "user fee" and 

not a "tax." The Michigan Supreme Court, in a divided 4-3 decision, found that 

City was charging landowners a “rain tax,” requiring voter approval under the socalled “Headlee Amendment” to the state constitution, because the charge was 

being used to pay for the capital investment on the utilities and services. On 

remand to the lower court, the decision was found to be prospective only, and no 

refunds of previously collected fees were required. That decision was upheld by 

the Supreme Court in 2001. 

 3-7 
However, in Roseburg School District v. City of Roseburg, 851 P.2d 595 (Or. 

1993), the Oregon Supreme Court found that city’s storm drainage utility fee was 

not a tax on property that would have been subject to the limitations of Article 

XI.11b of the Oregon Constitution (adopted in 1990 by a initiative petition known 

as “Ballot Measure 5”). The city had structured the utility fee in an effort to avoid 

the constitutional restriction, by making it “a fee for service and not a charge 

against property.” The court found it significant that unpaid charges did not 

become a lien against the property, and that the person responsible for payment 

could seek a reduction or elimination of the storm drainage service charge by 

demonstrating that the service was not being used. 

An earlier case decided by the Oregon Tax Court went the other way. Denney v. 

City of Gresham, 12 OTR 194, 1992 Ore. Tax LEXIS 7 (1992). In that case the 

user charge was related to the amount of impervious surface area on a property: 

$2.75 per month for all “residential property,” and $2.75 per month for each 2,500 

square feet of impervious surface on all other property, such as multifamily, 

commercial and industrial. The tax court found that the only way an owner of an 

improved property could avoid the charge was to destroy the improvements, 

removing impervious surfaces. The court also found that the charge could not be 

“controlled” or “avoided” by any practical means. 

The City of Roseburg explicitly designed its ordinance to avoid the outcome in 

City of Gresham. The Oregon Tax Court was not persuaded, finding the charge 

to be a tax as it had in the Gresham case. Roseburg School District v. City of 

Roseburg, 12 OTR 329; 1992 Ore. Tax LEXIS 33 (1992). However, the Oregon 

Supreme Court found the refinements made in Roseburg’s ordinance sufficient to 

distinguish it from the City of Gresham case and reversed the tax court’s 

decision. 

Voluntary Service and “Opt-Out” Provisions 

One element that has been found to influence the question whether a stormwater 

service charge is a tax or a fee is whether the user has a choice to accept or 

decline the service (sometimes phrased in terms of whether there is a “voluntary 

contractual relationship” between the user and the service provider). In the City

of Roseburg case, for example, the tax court found that it was “unrealistic to 

speak as if the property had a choice as to whether it allows runoff. Where the 

charge is being imposed on existing property, the ‘choice’ which can be obtained 

only through modification of the property is not a real choice.” The tax court was 

not persuaded by the city’s argument that the owner could control the fee by 

reducing or eliminating the discharge or water from the subject property. (The 

Oregon Supreme Court avoided the issue, and reversed the tax court on the 

ground that the Roseburg fee was not imposed upon the owner of real property 

as a direct consequence of ownership; rather, the fee was imposed on the 

occupant to whom the city water service was billed.) 

 3-8 
In the recent City of Rock Island case, on the other hand, the Illinois appeals 

court found that the opt-out provisions of a similar ordinance were sufficient to 

make the charge voluntary. The Illinois court held that, “[w]hile it might be cost 

prohibitive for each plaintiff to construct its own storm water run-off containment 

system, each would certainly be able to calculate the cost of doing so versus the 

cost of paying for the use of the City’s system. Voluntary participation involves 

nothing more than weighing the competing costs of participation.” 

The federal courts have addressed the same issue on several occasions. In 

United States v. Columbia, Missouri, 914 F.2d 151, 155-56 (8th Cir. 1990), the 

Eighth Circuit found that even the profit component of the city’s water and electric 

utility rates was not an impermissible tax on the federal government, because 

[t]he United States' obligation to pay the [fee] arises only from its consensual 

purchase of the City's property; it does not arise automatically, as does tax 

liability, from the United States' status as a property owner, resident, or income 

earner. When the United States purchases water, electricity, and related 

services, and then pays the utility bill, it does so as a vendee pursuant to its 

voluntary, contractual relationship with the City.” 

On the other hand, in United States v. City of Huntington, West Virginia, 999 F.2d 

71, 72-73 (4th Cir. 1993), the Fourth Circuit concluded that a city ordinance 

imposing a "fire service fee" and a "flood protection fee" on the United States, 

premised "on the basis of square footage of the buildings" was a tax, and not a 

user fee, based in part upon the fact that the charge was an “enforced 

contribution to provide for the support of government.” The court found that 

"liability for the 'user fee' charged by the City arises from the General Services

Administration's and United States Postal Service's status as property owners 

and not from their use of a city service." Id. at 74. 

In the ongoing litigation involving the stormwater fees imposed by the City of 

Cincinnati (discussed further below), the courts have sent conflicting signals as to 

the importance of the “voluntary” nature of the fee. In the original Court of Claims 

decision, City of Cincinnati v. United States, 39 Fed. Cl. 271 (1997), the court 

held that the storm drainage charge, which was imposed on all property owners 

within the city and was not the product of a voluntary purchase decision by the 

federal government, constitutes a tax, not a fee for services, and therefore could 

not be exacted from a federal entity such as NIOSH. 

On appeal, the Court of Appeals for the Federal Circuit agreed that the storm 

drainage service charge was not imposed as a result of a consensual 

arrangement between the city and the United States, as would be true in the 

case of a voluntary purchase of utilities or other services, and found that the 

stormwater drainage service charge was an assessment imposed on the United 

States involuntarily, by virtue of its status as a property owner. However, the 

Court of Appeals did not agree that this fact was dispositive of the question 

whether the service charge was a permissible fee for services or an 

 3-9 
impermissible tax. The Court of Appeals stated that “[t]here may be some 

instances in which a municipal assessment is involuntarily imposed but would

nonetheless be considered a permissible fee for services rather than an 

impermissible tax.” Cincinnati v. United States, 153 F.3d 1375, 1378 (6th Cir. 

1998). 

Whether or not a service charge is mandatory or voluntary is thus a factor to be 

considered, but is not necessarily determinative of the question whether the 

charge is a tax or a fee. The Georgia Supreme Court has suggested that 

whether a charge is voluntary is a factor because, if it is not mandatory, it cannot 

be a tax. McCleod v. Columbia County, 599 S.E. 2d 152 (Ga. 2004) (finding that 

the county stormwater ordinance was not a tax in part because property owners 

could reduce the amount of the charge by creating and maintaining private 

stormwater management facilities). 

The reverse, however, is not necessarily true – a charge which is mandatory may 

or may not be deemed a tax, depending on the circumstances of the particular 

case. Thus, mandatory fees for various types of municipal services have been 

upheld by a number of courts in recent years. See, e.g., Bloom v. City of Fort 

Collins, 784 P.2d 304, 304-05 (Colo. 1989) (approving mandatory transportation 

utility fee); State of Hawaii v. Medeiros, 973 P.2d 736, 741-42 (summarizing the 

declining importance of voluntariness in fees in many state courts); Hochstedler 

v. St. Joseph County Solid Waste Mgmt. Dist., 770 N.E.2d 910, 916 (Ind. Ct. 

App. 2002) (approving mandatory recycling charge as a permissible fee); Rogers 

v. Oktibbeha County Bd. of Supervisors, 749 So. 2d 966, 967 (Miss. 1999) 

(upholding mandatory garbage disposal fee on residents who did not use 

county's disposal system). See generally Reynolds, “Taxes, Fees, Assessments, 

Dues, and the "Get What You Pay For" Model of Local Government,” 56 Fla. L. 

Rev. 373, (April, 2004). 

Fee vs. Special Assessment 

The issue whether a stormwater service charge is a “user fee” or a “special 

assessment,” giving rise to different procedural requirements, has arisen in 

Florida (2003) and Colorado. 

In Gainesville v. State of Florida, 863 So. 2d 138 (Fla. 2003), the state DOT 

refused to pay the city’s stormwater fee, and the city sued. A settlement was 

reached in 2001, but when the city sought to validate a bond issue for its 

stormwater utility in 2003 the state DOT objected, arguing that the fee (based on 

impervious area using an "Equivalent Residential Unit" formula) was not a "user 

fee" but a "special assessment" that did not apply to state agencies. The bonds 

that were issued by the city could not be approved if fees were invalid, since the 

stormwater fees were pledged as collateral for those bonds. The Florida 

Supreme Court found that the fees were valid user fees, and the bonds were 

validated. The city was supported in the Supreme Court by an amicus brief 

 3-10 
jointly filed by the Florida Stormwater Association and several environmental 

groups, including Earthjustice and the Audubon Society. 

In the earlier case of City of Cocoa v. School Board of Brevard County, 711 So. 

2d 1322 (Fla. App. 1998), a Florida appeals court found that a stormwater utility 

fee was neither a “special assessment” nor an “impact or service availability fee,” 

from which school districts were exempted by statute. The trial court had 

apparently determined that no portion of the fees sought by the city were “user” 

fees, but the appeals court determined that the record was not sufficient to 

establish that the school districts were “involuntary” users of the stormwater utility 

and remanded the case for further proceedings to determine whether the 

program established by the city was a valid utility established pursuant to the 

statutory authority granted by the Florida legislature in Fla. Stat. § 403.031(17). 

That statute authorized the funding of local stormwater management programs 

“by assessing the cost of the program to the beneficiaries based on their relative 

contribution to its need,” with regular service bills “similar to water and 

wastewater services.” 

In City of Littleton v. State, supra, both the trial court and the state appeals court 

had found that the city’s stormwater management fee constituted a special 

assessment under Colorado state law, which could not be charged against the 

state agencies involved in the case. The Colorado Supreme Court reversed, 

after reviewing the factors to be considered in determining the nature of a charge 

imposed by a municipality against property owners within its jurisdiction. 

Distinguishing between ad valorem property taxes, excise taxes, special 

assessments, and special fees, the court recognized that the essential 

characteristic of a special assessment is that it confers some special benefit to 

the subject property. 

In this case, the services for which the fees were charged did not specially 

benefit the property owned by the agencies. The court stated that “[c]reating the 

capacity to remove excess water from property and prevent flooding are general 

services benefiting all property owners. While the performance of these services 

prevents diminution of the value of land, such services and the facilities 

necessary to the performance thereof do not directly enhance the value of the 

property . . . .” Consequently, the court concluded that the city’s stormwater 

charge was not a special assessment, but a service fee reasonably designed to 

meet overall costs of the service for which the fee was imposed. Although a 

portion of the fee billed by the city was used to defray costs of constructing and 

maintaining a drainage system, such costs were found to be reasonably related 

and essential to the provision of the contemplated services. 

Related to Cost of Services 

Inquiry into whether the amount of the fee is “reasonable” and directly related to 

the cost of providing the services rendered has been conducted in cases from 

Kentucky, Colorado, Virginia, North Carolina and Georgia. One aspect of this 

 3-11 
question that is often examined is whether the fees are reasonably related to the 

actual contribution of the property to the volume of stormwater runoff, or whether 

all properties are assessed a fixed amount regardless of size. 

In Twietmeyer v. City of Hampton, 497 S.E. 2d 858 (Va. 1998), the City sued 

owners of seven residential properties for failure to pay fee based on flat rate. 

The property owners argued a flat rate fee was not based on contribution to 

stormwater runoff. The Court found that the city ordinance was not unreasonable 

because non-residential properties were charged a fee 5 times higher than 

residential properties ($12.50 per month rather than $2.50 per month). 

In one case in North Carolina, the costs of complying with certain elements of 

U.S. EPA’s “Phase II” municipal stormwater permit program were found to go 

beyond the costs to construct and operate the stormwater drainage system, and 

the city was ordered to refund that portion of the fee. Smith Chapel Baptist 

Church v. City of Durham, 517 S.E. 2d 874 (N.C. 1999). The City assessed fees 

on all developed property, based on impervious area. The state Supreme court 

found in a 1998 opinion that such fees were not covered by a particular state 

statute, but were nevertheless authorized under the state constitution. However, 

in its subsequent 1999 opinion after rehearing, the Supreme Court held that the 

applicable state statute limited fees to the actual cost of providing the stormwater 

drainage system, and did not cover the entire stormwater management program 

– in particular, costs incurred solely for compliance with federal environmental 

regulations (the Phase II stormwater permit requirements). A subsequent 

amendment to the statute was required to address this issue. 

Properties Benefited 

The question whether the properties burdened by the fees are receiving a 

proportionate benefit from the services provided has been examined in Florida 

(1995), Kentucky (1996) and Alabama. 

In the often-cited case of Sarasota County v. Sarasota Church of Christ, 667 S. 

2d 180 (Fla. 1995), the City imposed a stormwater utility fee on all developed 

property. The Church argued that the ordinance imposed a tax because it 

benefited the community at large and church received no specific benefit. The 

Florida Supreme Court held that the fee was valid because all properties with 

impervious surfaces benefited from the stormwater services. 

In Kentucky River Authority v. City of Danville, Kentucky, 932 S.W.2d 374 (Ky. 

App. 1996), the city argued that it received no benefit from the activities of the 

Authority. The court disagreed, holding that the preservation of the watershed 

was a benefit that accrued to all within its boundaries. The court likened the fee 

to emission fees collected from entities that emit air pollutants and are used to 

fund the state air program, noting that although there may be no direct or 

immediate benefit to the payer of the fees, the use of the air and the 

contamination of it are sufficient to justify the imposition of the fee. 

 3-12 
In Densmore v. Jefferson County, supra, the Plaintiffs alleged that a county 

stormwater fee was an unconstitutional tax with no relationship to benefit 

received by property owners. The Alabama Supreme Court held that the fees 

were valid because the benefit conferred on property owners need not relate 

directly to the exact amount paid. 

Application to Capital Improvements 

Whether or not the fees must be confined to the actual cost of providing 

stormwater services alone, or whether any surplus can be collected and applied 

to the cost of system expansion and capital improvements has been litigated in 

Ohio, Tennessee, Colorado and North Carolina. 

In Wooster v. Graines, 556 N.E. 2d 1163 (Ohio 1990), the City of Wooster 

adopted an ordinance to establish a storm drainage utility for maintaining, 

repairing and improving the sewer system (fees were based on impervious area). 

The owner of a shopping center refused to pay, claiming the fee was invalid 

because city accumulated a surplus to fund capital improvements in new areas. 

The Ohio Supreme Court held that the ordinance was valid because sewer funds 

were segregated and reserved for future sewer projects in Wooster. 

Application of stormwater fees to capital construction costs was also upheld in 

the City of Littleton, Vandergriff, and Smith Chapel Baptist Church cases, 

discussed above.

FEDERAL FACILITIES

The imposition of stormwater fees on federal facilities involves a special 

consideration of the tax vs. fee issue. The general principle that states cannot 

tax the United States derives from Chief Justice Marshall's opinion in McCulloch

v. Maryland, 17 U.S. (4 Wheat.) 316, 4 L. Ed. 579 (1819). Although the immunity 

of the federal government and its instrumentalities has been the source of often 

conflicting decisions, "the one constant . . . is simple enough to express: a State 

may not, consistent with the Supremacy Clause, U.S. Const., Art. VI, cl. 2, lay a 

tax 'directly upon the United States'. . . . The Court has never questioned the 

propriety of absolute immunity from state taxation." United States v. New 

Mexico, 455 U.S. 720, 733, 71 L. Ed. 2d 580 , 102 S. Ct. 1373 (1982). 

On the other hand, it is well-established law that the United States must pay 

reasonable user fees. For instance, charges for services from city-owned utilities 

are clearly fees for which the federal government would be liable to the same 

extent as any other customer. See United States v. Harford County, Maryland, 

572 F. Supp. 239, 241 (D. Md. 1983) ("The federal government has . . . 

recognized its obligation to pay state or county charges based on the quantum of 

water or sewer services rendered.") 

 3-13 
Furthermore, the Clean Water Act contains an express waiver of sovereign 

immunity for certain pollution-control related fees. Clean Water Act § 313(a) 

(“Federal facilities pollution control”) expressly provides that: 

Each department, agency or instrumentality of the executive, 

legislative, and judicial branches of the Federal Government . . . 

shall be subject to, and comply with, all Federal, State, interstate, 

and local requirements . . . respecting the control and abatement of 

water pollution in the same manner, and to the same extent as any 

nongovernmental entity including the payment of reasonable 

service charges. . . . This subsection shall apply notwithstanding 

any immunity of such agencies, officers, agents, or employees 

under any law or rule of law. 

Importantly, this waiver applies only to fees or service charges, and not to taxes. 

As seen in the numerous state cases discussed above, this distinction is often 

difficult to make in practice. The United States Supreme Court has established a 

three-pronged test for determining whether fees imposed by local governments 

on federal facilities are “reasonable service charges” or taxes (Massachusetts v. 

United States, 435 U.S. 444 (1978)): 

o Is the fee or service charge non-discriminatory? 

o Is it a fair approximation of the cost of the benefits received? 

o Is it structured to produce revenues that will not exceed the 

regulator’s total cost of providing the benefits? 

Under the Massachusetts case, 1) the federal government must not be treated 

any differently in the enforcement of the fee requirement than other regulated 

entities; 2) the fee charged must be a fair approximation of the benefits received 

to be considered “reasonable;” and 3) the fee must be structured to produce 

revenues that will not exceed the total cost to the state of the benefits supplied. 

This test has been applied to environmental fees in several cases, most notably 

the long-running litigation involving the New York State Department of 

Environmental Conservation (NYSDEC) and the U.S. Department of Energy 

(USDOE). 

That series of cases involved the question of whether certain hazardous waste 

regulatory charges imposed by New York on federal installations were 

"reasonable service charges" within the meaning of the sovereign immunity 

waiver provision in the Resource Conservation and Recovery Act, 42 U.S.C. 

6961. In January 1989, NYSDEC brought four consolidated actions in New York 

State Supreme Court against USDOE to recover unpaid environmental program 

regulatory charges, including hazardous waste program and waste transporter 

program charges, assessed by the NYSDEC against ten federal facilities from 

1983 to 1989. USDOE counterclaimed for a refund of approximately $ 400,000 

 3-14 
and related relief for regulatory charges already paid. Those actions were 

subsequently removed to the District Court for the Northern District of New York. 

Arguing that the waste regulatory charges were unreasonably high, USDOE 

asserted that in every year between 1983 and 1989, "total waste regulatory 

charges exceeded [NYSDEC]'s actual services [to the ten federal facilities] by a 

ratio of approximately nine to one ($1,163,591.58 vs. $ 126,792.13)." The 

District Court denied both parties’ motions for summary judgment because 

neither party had submitted evidence "as to the value of the overall benefits the 

facilities receive in light of the programs and services made available to them by 

[NYSDEC] should the need for such assistance ever arise." New York State 

Department of Environmental Conservation v. United States Department of 

Energy, 772 F. Supp. 91, 99-100 (N.D.N.Y. 1991). 

In later proceedings, the District Court granted NYSDEC's motion for partial 

summary judgment and denied USDOE's motion for summary judgment. New 

York State Department of Environmental Conservation v. United States 

Department of Energy, 850 F. Supp. 132 (N.D.N.Y. 1994) ("NYSDEC II"). The 

District Court explained that the Massachusetts test "requires only a rational 

relationship between the method used to calculate the fees and the benefits 

available to those who pay them." Id. at 143. The Court found such a 

relationship in this case because (1) larger facilities are more expensive to 

regulate and require more services than smaller facilities; (2) all services which

NYSDEC provides pursuant to these regulatory programs, whether used or not, 

are available to the United States should they be needed in the future; and (3) 

the total receipts from these regulatory fees have been substantially less than the 

actual costs of these programs – all of which demonstrates that NYSDEC's 

method of calculating its charges results in a fair approximation of the cost of the 

use of the system. 

Following two additional decisions by the district court in 1997 and 1999, the 

case reached the Second Circuit Court of Appeals. Jorling v. United States 

Department of Energy, 218 F.3d 96 (2d Cir. 2000). At that point, only the 

reasonableness of the hazardous waste fee was at issue. USDOE did not 

dispute the first or third parts of the Massachusetts test. It acknowledged that 

NYSDEC's waste regulatory charges were non-discriminatory and were not 

structured to produce revenues that would exceed the total cost to NYSDEC of 

the benefits to be supplied. However, it disputed the second part of the 

Massachusetts test, challenging the District Court's finding that no reasonable 

jury could find that the waste regulatory charges did not meet the "fair 

approximation" component of the Massachusetts test. USDOE argued that the 

charges cannot meet that component of the test because the charges from 1983 

to 1989 exceeded the cost of supplying the services actually received by a nine 

to one ratio. 

 3-15 
The Court of Appeals found that, under Massachusetts, a fair approximation of 

the use of the service adequately serves as a surrogate for an otherwise 

complicated and expensive attempt to allocate costs. The court cited Brock v. 

Washington Metropolitan Area Transit Authority, 254 U.S. App. D.C. 190, 796 

F.2d 481, 485 (D.C. Cir. 1986) for the proposition that "Massachusetts did not 

hold that a user fee must represent retrospectively a close approximation of the 

actual, historical benefit to the user. Rather, Massachusetts held only that the 

method used to calculate the fee must rationally be designed to approximate 

prospectively the benefit to the user." The court also found that the 

Massachusetts test applies not only to services used but also to services 

available for use. Based on these principles, that court found that NYSDEC’s

waste regulatory charges meet the "fair approximation" component of the 

Massachusetts test, because the method of calculating the hazardous waste 

program charges was reasonably designed to fairly approximate use of the 

hazardous waste system's available services, and thereby to approximate the 

cost of supplying such services to particular generators of waste or operators of 

waste facilities. 

The principles established in the Massachusetts case and explored in the 

NYSDEC litigation are currently the subject of ongoing litigation between the City 

of Cincinnati and the U.S. Department of Health & Human Services (HHS). The 

National Institute of Occupational Safety and Health (NIOSH), a part of HHS, 

refused to pay stormwater fees due under a 1985 city ordinance using formula 

based on size of property and “intensity of development” factor to determine 

“equivalent runoff units.” The city initially attempted to bring suit in Federal Court 

of Claims based on “implied contract” for services. In City of Cincinnati v. United 

States, 39 Fed. Cl. 271 (1997), the Court of Claims dismissed the claim as an 

unconstitutional “tax” based on property size rather than services actually used. 

In City of Cincinnati v. United States, 153 F.3d 1375 (Fed. Cir. 1998), the Court 

of Appeals for the Federal Circuit upheld the lower court’s dismissal of the case, 

but only because there was no “implied in fact” contract between the city and the 

federal government, and the Court of Claims therefore lacked jurisdiction to hear 

the case. The Court of Appeals expressly declined to rule whether or not the 

city’s storm drainage service charge was a tax or a fee. 

In October 2003, the City re-filed its claim in U.S. District Court, asserting 

jurisdiction under the Tucker Act and the Declaratory Judgment Act. City of 

Cincinnati v. United States, Case No. 03-731 (S.D. Ohio, filed 10/23/03). The 

United States filed a Motion for Judgment on the Pleadings in February 2004, 

arguing res judicata and lack of subject matter jurisdiction. In May 2004, the City 

moved for leave to file an Amended Complaint based on its local ordinance and

the waiver of sovereign immunity in CWA § 313. The case was still pending 

before the District Court for the Southern District of Ohio as of October 2005. 

 3-16 
SUMMARY AND CONCLUSIONS

Although stormwater management fees have been upheld in the majority of 

states where they have been challenged, the passions inspired by the general 

public perception that any new governmental fee is a disguised and unlawful tax 

ensures that challenges to such fees will continue to arise. Determining the 

legality of the financing mechanism chosen for any municipal or county 

stormwater program will depend upon a close analysis of local state law. 

Nevertheless, certain general principles emerge from the cases discussed 

above. 

(1) In order for a stormwater service charge to be regarded as a fee, rather than 

a tax, the local government should be prepared to demonstrate that the overall 

cost of the program is reasonably related to the value of the service being 

provided, and that the funds raised are segregated for use by the stormwater 

program and not for general revenue purposes. 

(2) The fee should be structured so that the amount charged to particular 

properties is proportional to those properties’ contribution to stormwater runoff. 

The distinction may be as simple as a different fee for residential and commercial 

properties, or as elaborate as a sliding scale based upon “impervious area” or 

degree of development. 

(3) Some provision should be made so that participation in the program can be 

characterized as “voluntary,” whether it is accomplished through an “opt-out” 

provision for properties with their own stormwater management facilities or a 

more complex system of credits or offsets based upon the amount of volume 

actually contributed to the public stormwater system. 

(4) In states such as California, Michigan and others with special constitutional 

provisions governing the imposition of any new tax, it may be wise to seek the 

requisite voter approval for implementation of local stormwater funding programs 

even if they are designed and intended to be fee-based rather than tax 

supported. 

 3-17 
CASES CITED (in chronological order)

STATE: 

City of Billings v. Nore, 148 Mont. 96; 417 P.2d 458 (Mont. 1966) 

Teter v. Clark County, 704 P.2d 1171 (Colo. 1985) 

Zelinger v. City and County of Denver, 724 P.2d 1356 (Colo. 1986) 

Long Run Baptist Ass'n v. Louisville MSD, 775 S.W.2d 520 (Ky. App. 1989) 

Wooster v. Graines, 556 N.E. 2d 1163 (Ohio 1990) 

Dennehy v. City of Gresham, 12 OTR 194; 1992 Ore. Tax LEXIS 7 (Ore. Tax Ct. 

1992) 

City of Littleton v. State, 855 P.2d 448 (Colo. 1993) 

Roseburg School District v. City of Roseburg, 851 P.2d 595 (Ore. 1993) 

City of Wichita, Kansas v. Kansas Taxpayers Network, 874 P.2d 667 (Kan. 

1994) 

Sarasota County v. Sarasota Church of Christ, 667 S. 2d 180 (Fla. 1995) 

Kentucky River Authority v. City of Danville, Kentucky, 932 S.W.2d 374 (Ky. 

App. 1996) 

Smith v. Spokane County, 948 P.2d 1301 (Wash. App. 1997) 

City of Cocoa v. School Board of Brevard County, 711 So. 2d 1322 (Fla. App. 

1998) 

Twietmeyer v. City of Hampton, 497 S.E. 2d 858 (Va. 1998) 

Vandergriff v. City of Chattanooga, 44 F. Supp. 2d 927 (E.D. Tenn. 1998) 

Bolt v. City of Lansing, 587 N.W.2d 264 (Mich. 1998) 

Fulton County Taxpayers Association v. City of Atlanta, No. 1999CV05897, 1999 

WL 1102795 (Ga. Super. Ct. Sept. 22, 1999). 

Smith Chapel Baptist Church v. City of Durham, 517 S.E. 2d 874 (N.C. 1999) 

South Carolina v. City of Charleston, 513 S.E.2d 97 (S.C. 1999) 

Densmore v. Jefferson County, 813 So. 2d 844 (Ala. 2001) 

Howard Jarvis Taxpayers Ass'n v. City of Salinas, 98 Cal. App. 4th 1351 (2002) 

City of Gainesville v. State of Florida, 863 So. 2d 138 (Fla. 2003) 

McCleod v. Columbia County, 599 S.E. 2d 152 (Ga. 2004) 

Church of Peace v. City of Rock Island, 2005 Ill. App. LEXIS 448 (2005) 

FEDERAL:

Massachusetts v. United States, 435 U.S. 444 (1978) 

New York State Department of Environmental Conservation v. United States 

Department of Energy, 772 F. Supp. 91 (N.D.N.Y. 1991) 

Jorling v. United States Department of Energy, 218 F.3d 96 (2d Cir. 2000) 

City of Cincinnati v. United States, 39 Fed. Cl. 271 (1997) 

City of Cincinnati v. United States, 153 F.3d 1375 (Fed. Cir. 1998) 

City of Cincinnati v. United States, Case No. 03-731 (S.D. Ohio, filed 10/23/03) 

 3-18 
CHAPTER 4 

IMPLEMENTING USER-FEE BASED FUNDING 

OVERVIEW

The dynamic change which has occurred in the expectations placed on the 

municipal stormwater program has overwhelmed traditional stormwater program 

funding. This has driven the exploration of new funding strategies and given rise 

to the increasing popularity of user fee/utility based approaches. 

The breadth of the changes motivating this exploration has required that not just 

funding mechanisms be explored. The services delivered by the municipal 

stormwater program, the quality of those services, the degree to which they 

satisfy local expectations, and the degree to which they satisfy stakeholders 

needs, become critical elements in structuring user fee based funding. In the 

eyes of stakeholders, implementing a new stormwater funding mechanism is 

secondary to receiving good stormwater system service. The performance of the 

stormwater program, as perceived by the program’s stakeholders, therefore, 

becomes a focal point of the effort to develop a functional stormwater funding 

program. 

Implementation of user fee based funding involves a related set of actions and 

activities. These occur within a flexible framework that promotes due diligence in 

five key areas of focus: political, financial, legal, informational and technical. In 

some communities a simple vote of the governing body is all that is needed to 

implement a funding mechanism. In these cases, little program education, 

stakeholder involvement, and background information may be needed to secure 

the necessary authorization. In most cases, however, a much more involved 

process is necessary to bring about program and funding actions. This chapter 

discusses this framework and process. 

 4-1 
FORCES DRIVING ACTION

As described in Chapter 1, over the last thirty years stormwater programs have 

gone through significant shifts in basic philosophy, approach and service 

expectation. Originally stormwater programs were intent on efficient drainage, 

taking runoff quickly to nearby streams. Resulting flooding then caused local 

communities to change their basic philosophy from “efficient drainage” to one of 

“flood control” through the imposition of detention requirements and stricter 

floodplain controls. 

Later still the concept of “stormwater master planning” began to replace 

ineffective detention programs. Then, in the late 1980’s stormwater program 

managers were faced with the need to also address stormwater quality through 

NPDES and other regulatory programs. 

Today there is a convergent set of stormwater program forces that has moved 

stormwater to a full-fledged urban utility service stature similar to water and 

wastewater. These forces can vary from community to community, but generally 

can include: 

9 aesthetic and regulatory demands for “greener” environmentally 

friendly stormwater systems, sometimes without clear definition 

of what that means, or a track record in concept performance or 

 sustainability; 

9 multi-objective disaggregated stormwater system components that 

integrate conservation and preservation practices, sometimes 

called, Low(er) Impact Development; 

9 integration of stormwater infrastructure planning and design with 

site layout and function, sometimes called Better Site Design; 

9 redevelopment that incorporates “micro-systems” of pollution 

removal 

9 a plethora of commercial and industrial site controls; 

9 the need, often mandated through endangered or threatened 

species considerations, to integrate ecological assessments and 

designs; 

9 mandated public education and involvement in stormwater program 

 conception and implementation, and the emergence of non-profit 

 interest groups; 

9 demanding regulatory requirements evolving in a fast changing 

legal arena, and on again/off again numeric pollutant criteria; 

9 ongoing program needs for maintenance and capitalization of the 

system, often with extended levels of service; and 

9 significant reductions in general fund dollars for stormwater 

programs concurrent with the doubling of stormwater program 

costs. 

 4-2 
THE STORMWATER UTILITY, PROGRAM CONCEPT AND 

DUE DILIGENCE

Utility Program Concept

The stormwater utility is an umbrella under which individual communities can 

address their own specific needs in a manner consistent with local problems, 

priorities, and practices. A stormwater utility provides a vehicle for: 

9 consolidating or coordinating responsibilities that were previously 

dispersed among several departments and divisions; 

9 generating funding that is adequate, stable, equitable and 

dedicated solely to the stormwater function; and 

9 developing a program that is comprehensive, cohesive and 

consistent year-to-year. 

A stormwater utility is equitable because the cost is borne by the user on the 

basis of demand placed on the drainage system. It is stable because it is not as 

dependent on the vagaries of the annual budgetary process as are taxes. And it 

is adequate because a typical stormwater program can be financed with charges 

within the limits of the customer’s willingness to pay. 

No two successful utilities are identical just as no two cities are just alike. 

Therefore, it is not prudent to follow a pre-fabricated “one size fits all” approach, 

but to carefully seek to understand the make-up of the community, its problems, 

its goals, and its resources. There must be a clear understanding of the 

community’s stormwater related systems, capabilities, and issues. 

Some communities have simply attempted to clone a stormwater program or 

utility rate methodology of another city or county. Some consulting firms have 

attempted to sell a uniform approach. A local community should carefully guard 

against such a temptation. A stormwater program, rate structure, or billing 

methodology cloned from somewhere else rarely can sustain intense scrutiny by 

a staff, advisory committee, elected officials, or interest groups or the community 

at-large if the program utility doesn’t meet local needs. Such programs often fail. 

The real danger of the cloning approach is that it inevitably falls short of meeting 

the local stormwater program expectations because it is not founded on 

addressing them. As was mentioned in Chapter 2, the local problems, needs, 

and circumstances must drive the form, priorities, and pace of the program. The 

success of leading stormwater utility programs is based on tailoring the program 

and financing strategies to the local needs and solving real short-term and longterm stormwater problems. 

 4-3 
Due Diligence 

“Due diligence” is the process of insuring that the community’s program and 

funding expectations will be met. It includes the formulation and execution of a 

plan with appropriate levels of investigation, establishment of facts, estimation of 

future prospects, framing of assumptions and risks, and establishment of a plan 

of action and funding. It can also result in a decision not to act. 

Attempted stormwater utility implementations have failed for a number of 

reasons, most of which have to do with inadequate due diligence. For example, 

some key reasons given in failure post mortems include: 

9 Not understanding the process and cutting key corners 

9 Failure to establish stakeholder support 

9 Failure to identify and account for hurdles 

9 Inadequate legal assessment of the authority for a particular rate 

structure 

9 Failing to work with media 

9 Inability to focus the stormwater program on citizen felt needs 

9 Inaccurate databases without ability to appeal 

9 Poor citizen or customer service 

9 Rate structures without rational nexus 

9 Rate structures too complex to explain and seemingly inequitable 

9 Failure to understand political timing 

Due diligence must be pursued along four major areas of concern, or tracks. 

These tracks, which are foundational to the utility implementation process and 

which are discussed in the implementation section of this chapter, are as follows: 

9 Public – are there appropriate levels of involvement of key 

stakeholders, is the general public handled correctly, is the media 

appropriately involved, is customer service accounted for, are staff 

and political leadership elements accounted for and handled 

appropriately? 

9 Program – does the program make sense, is it compelling, is it 

within the community’s ability and willingness to pay, does it meet 

citizen perceptions, is it action oriented? 

9 Finance – are legal tests satisfied, is it simple yet fitted to the local 

situation, does it have the perception of equity, are proper steps 

followed, does it support the stormwater program? 

9 Database – is the database accurate within legal requirements, is 

there an appeals process, is it maintainable within reasonable cost 

constraints, are anomalies accounted for, is customer service 

appropriate and responsive? 

The cost of appropriate due diligence is not insignificant but should be kept in 

perspective. Experience has shown that, should a stormwater utility fail it takes 

 4-4 
five to seven years for there to be a staff and political willingness to make 

another attempt. The opportunity cost of failure is then five to seven years of lost 

revenue. For example, for a stormwater utility that raises $2,000,000 per year 

the opportunity cost of failure is $10 to $14 million. The cost to do a thorough job 

of due diligence in this example, however, is rarely more than $350,000, one to 

three months’ revenue. 

Additional benefits of appropriate up front due diligence include: 

9 Better initial and long-term public knowledge and cooperation 

leading to greater support and participation. 

9 A funding rate structure that matches and meets short and long 

term program needs leading to stable, adequate funding. 

9 A stormwater program that can meet both the capital and 

operations needs of the local community, leading to better services 

and ability to meet regulatory demands. 

9 More efficient long-term database maintenance, leading to lower 

operating costs and better customer service. 

Those communities that have cut corners in due diligence normally find 

themselves hampered in their ability to manage the database, meet customer 

expectations, solve flooding problems, meet regulatory needs, and modify the 

program or utility to meet changing demands. A process can be developed that 

facilitates such change while maintaining the effectiveness of the stormwater 

program and the utility. 

CREATING MOMENTUM AND A PROCESS FOR PROGRAM 

ACTION

The ability to bring about action that moves a stormwater program forward and 

produces the necessary funding, depends on the ability to bring key leaders to an 

understanding of the problems, and a vision of the solutions. To achieve this 

understanding and to create such a vision requires a logical and acceptable 

process which leads a community to action. 

Understanding Problems 

Understanding of the problems involves building a “compelling case for action”. 

In every community there are good, even compelling, reasons to improve the 

way stormwater programs are executed. It might be a popular stream that is 

becoming increasingly impacted, a lack of riparian park space, decaying 

drainage infrastructure and mounting complaints, unfunded regulatory mandates, 

local flooding, financial pressures, loss of fish, beach closings, a roadway or 

bridge collapse, or law suits. Such issues draw the attention and energy of 

stakeholders and leaders to opportunities for action. 

 4-5 
Assembling a “compelling case” is step one in developing this understanding and 

bringing about action. People in general are motivated along two complimentary 

courses of persuasion – information (data) and stories. Some people want facts 

and statistics (data), while others are moved to action by horror stories and 

pictures. When we begin to quantify the community’s perception of program 

need or make the case for change and new funding, we seek to address both 

types of people. Table 4-1 gives some examples taken from successful 

stormwater utilities. 

 Information Stories 

• Statistics on repair costs 

• Cost information 

• Infrastructure information 

• Lost revenue or tourist dollars 

• Regulatory Facts 

• Backlog information on flooding 

• Unfunded mandate information 

• Flooding pictures 

• Horror stories 

• Movies 

• Testimonials 

• Environmental or aesthetic 

appeals 

• Drawings of a future 

greenway, trail, etc. 

Table 4-1: Building Blocks for a Compelling Case 

Building a compelling case and knowing when, how, and to whom to present it is 

more of a political and technical art form than it is a science. But taking time to 

build informed consent to move forward and to support program change and new 

funding methods is vitally necessary. 

Vision for the Future

People rarely rally around simply solving problems. It is in creating a vision for 

what could or should be that causes people to begin to support the concept of a 

stormwater utility as a vehicle for action. 

Building vision is a process of moving from recognizing problems, needs, issues 

and opportunities to seeing the way things could be. It involves seeing what 

others have done and showing how practical solutions can create significant 

improvement in the quality of life. 

An artist’s rendering of what an ugly polluted stream could become can help rally 

people. A seminar or workshop with representatives from other places telling

about wonderful changes in their community gets people leaning into change. 

Sometimes simply showing how problems would be solved brings about a 

determination to move forward. 

 4-6 
Bringing About Action

Leaders often agree that there must be action to bring about recommended 

improvements but are not sure how to begin. The use of a citizen’s stakeholder 

group is an effective technique which facilitates development of problem 

understanding and of the vision for the future, and is a useful part of the process 

for action. Ten to fifteen people who adequately represent key positions or ideas 

can move together through the process. 

Sometimes these meetings are over-controlled by well-meaning facilitators, or a 

citizen’s group is asked to merely react to a fully developed solution. In both 

cases creativity can be stifled, citizen’s can lose interest, and input can 

deteriorate. But if allowed true input, the group will have ownership of the plan 

and will often help sell it. 

 

An effective tool in bringing about action is the business plan approach as 

discussed in Chapter 2. Facts are fine, but process, such as that produced by a 

stormwater business plan, moves things forward, formulating a road map and 

structure for action. 

Business planning has not been a normal approach for local government. Local 

government has not typically thought of itself in terms of what it is selling, how it 

measures success, and who the customer is. A generic business plan asks and 

answers the following questions: 

• Who we are? 

• What business are we in? 

• What’s going on now? 

• Where do we want to go? 

• How do we want to get there? 

• What are the steps to make it happen? 

• How will we know when we have arrived and, how can we 

demonstrate it to someone else? 

• How we will pay for it? 

The business plan model, which measures goals in “program efficiency” and 

“program effectiveness”, must be somewhat modified for local government use. 

Resistance to getting lost in too many technical details will help move the 

business plan to a useful conclusion. 

Process Framework

The development of problem understanding and a future vision, and the exercise 

of such tools and techniques as a stormwater business plan and citizens impact 

groups require a structured format to insure a successful outcome. In this case, 

that outcome would be a utility structure for a comprehensive stormwater 

program. Figure 4-1 illustrates an overall process framework for development of 

 4-7 
a utility funding mechanism. Only the first and third steps might be considered 

absolutely necessary. The steps are: 

9 Quick Concept Study – answers the question: 

“does the proposal make sense”, and if the 

answer is “yes” the work goes forward. 

9 Feasibility Study – creates both information 

and momentum for implementation, and is 

used as an intermediate step if success is not 

 fairly certain. 

9 Utility Implementation – is the process of 

working in a coordinated and logical way 

through the details of planning implementation 

 and due diligence. 

 

Quick Concept 

Study

Feasibility Study

Utility 

Implementation

Figure 4-1: Overall Process Framework 

PROCESS FRAMEWORK, QUICK CONCEPT STUDY

The purpose of this step is to assess the basic advisability of pursuing a 

stormwater program and funding assessment with the potential of implementing 

a stormwater user fee. Designed to be low cost, fast paced, and focused, it: 

9 Tests the water with very little political, financial, or emotional 

investment, 

9 Can normally be authorized without an RFP, 

9 Operates “under the radar” as an internal quick study, 

9 Builds internal vision for going forward, 

9 Can happen very quickly, taking only days to complete. 

 4-8 
A consultant team or in-house facilitator typically takes the staff through a 

consideration of the following questions, and the answers leading to both a 

program and funding direction: 

9 What is the local government currently doing in terms of stormwater 

management? 

9 Why should the local government pursue a study and potential 

funding method like this, what is the compelling case? 

9 What stormwater program priorities should guide the local 

government in the next three to five years? 

9 What larger program improvements should be made and what 

would be the costs? What is the revenue potential of a utility fee or 

other major revenue source? 

9 What are the major hurdles or potential “show stoppers” to going 

forward? 

9 What are the immediate next steps should a “GO” decision come 

out of this study? 

Integrated into this study is the potential for staff presentation of the findings and 

an educational/informational overview of a stormwater utility funding mechanism. 

PROCESS FRAMEWORK, FEASIBILITY STUDY

The purpose of the feasibility study is to assess the local government’s existing 

stormwater management program, to make recommendations for future 

directions and changes, and to assess the feasibility of funding the program with 

a stormwater utility (user fee) and other methods. 

Figure 4-2 illustrates a typical “roadmap” for the feasibility study. 

Figure 4-2: Feasibility Study Roadmap 

Planned

Program

Program

Description

Problems &

Needs

Funding

Options

Program

Priorities

Final

Report

 4-9 
Typically a group of citizens and staff are taken through a consideration of the 

following questions, the answers leading to both a program and funding direction: 

9 What is the local government currently doing in terms of stormwater 

management? 

9 What are the stormwater related problems, issues, needs, 

resources, and opportunities currently faced by the local 

government? 

9 What stormwater program priorities should guide the local 

government in the next three to five years? 

9 What specific program improvements should be made and what will 

be the costs? 

9 What is (are) the best way(s) to pay for these program 

improvements? 

9 How should the funding method(s) be implemented? 

The feasibility study is used when there is an inclination to go forward with a 

stormwater utility but sufficient support has not been developed to insure 

adoption of a utility ordinance. The feasibility study essentially accomplishes the 

first few steps in establishing a stormwater utility without the commitment from 

elected officials to make the final decision. 

The feasibility study can be a worthwhile endeavor because it: 

9 is low risk; even if implementation of a utility is found infeasible, the 

study is a success because it accurately determined a “no go” 

decision was best; 

9 tests the water before committing to a user fee, giving political 

leaders a sense of safety because the approach is phased and 

involves others in the “go” decision; 

9 provides broader backing and wider support among the community 

and brings them into the process early; 

9 builds momentum and support toward a “go” decision through 

logical consideration of program needs and concerns; 

9 provides an early warning of hurdles and pitfalls; 

9 saves time and money because implementation costs can be 

defined and may be lowered by anticipation and planning; and 

9 develops sufficient legal due diligence to allow for borrowing of the 

implementation costs, with later payback from the user fee revenue 

stream. 

The advantage of this kind of feasibility study over some other approaches is its 

initial focus on problem solving. The focus of the feasibility study is not just 

revenue generation but program improvement. This initial concentration on 

 4-10 
identifying and solving problems is key, and follows the process for bringing 

about action discussed previously. 

Often the use of a citizen’s group serves as the vehicle for taking the local 

government through the business plan approach and the roadmap in Figure 4-2. 

This can be accomplished in four to seven meetings and can be very 

participation oriented. 

Other forms of stakeholder participation in the feasibility study can involve: 

9 citizen review of a previously completed consultant study where it is 

presented in a series of meetings with comment sought; 

9 public forums where issues are openly discussed by a panel with 

questions and input sought from the audience; or 

9 study groups where a specific need, such as flooding, is

investigated leading to solution concepts and identification of 

funding needs. 

PROCESS FRAMEWORK, UTILITY IMPLEMENTATION

Regardless of the use of a feasibility study, the implementation of a successful 

user fee follows four “tracks” of activity. Figure 4-3 outlines these four tracks in

an overall utility implementation flow chart. It is crucial that these four tracks are 

coordinated and timed to occur as shown. While there are almost infinite 

variations on this figure, the key activities within the figure are all important and 

should not be skipped.

For larger communities there can be a manager for each of the four tracks. For 

smaller projects a single manager can handle multiple tracks, though it often 

makes sense and increases project success for each track to have an 

experienced expert in the lead. 

The Public Track

Though not resulting in an “operational” part of the utility, this track serves the 

whole process. It involves four basic phases: planning the public involvement

and information process; conducting the involvement and public education 

process; carrying out the implementation campaign; and monitoring utility 

implementation and customer service. 

Often a citizen’s stakeholder group is involved. A citizens group can assist in the 

work of all four tracks and is particularly useful in establishing policy and priorities 

and to serve as eventual proponents of the recommended action. 

Stormwater utilities are rarely infeasible technically, and legal constraints can 

usually be overcome. It is in development of public, stakeholder, and political 

 4-11 
support that the difficulties often arise. Thus the Public Track is often the key to 

success of utility development efforts. 

 FUNDING

POLICY ISSUES

RATE STRUCTURE

ANALYSIS

RATE STUDY &

CASH FLOW

ANALYSIS

RATE

ORDINANCE

UTILITY IMPLEMENTATION & CUSTOMER SERVICE

PROBLEMS, NEEDS

AND GOALS

ORGANIZATIONAL

ISSUES

COST OF SERVICE

ANALYSIS

UTILITY

IMPLEMENTATION

STEPS

PROGRAM

PRIORITIES &

OBJECTIVES

DATABASE

POLICY ISSUES

MASTER

ACCOUNT FILE &

BILLING DATA 

BILLING SYSTEM

DEVELOPMENT

INQUIRY AND

COMPLAINT

RESPONSE

DATA, MATERIALS

& INFORMATION

DEFINE PUBLIC

INFO & ED PLAN

STAKEHOLDERS

& GEN EDUCATION

IMPLEMENTATION

CAMPAIGN

 FUNDING

LEGAL ISSUES

Public Program Finance Database

Figure 4-3: Utility Implementation Approach

It is important to remember that there are many “publics” in a local community, 

and that each has a stake or special interest in a stormwater utility with reasons 

to both support and oppose it. The following are examples: 

“Public” “Special Interest”

9 Developers Regulatory and Financial 

9 Environmentalists Stormwater Quality, Habitat 

9 Neighborhoods Flooding, Convenience, Property 

Values 

9 Clubs Participation, Voice 

9 Social, Ethnic, Economic Locations, Jobs, Costs 

9 Tax Exempt Entities Utility vs. Tax 

9 Political Leaders Timing, Message, Process 

9 Media Is it “News”? 

9 Commercial/Industrial Entities Costs, Credits, Service 

9 Technical Specialists Standards, Criteria and Procedures 

 4-12 
Early in the process, preferably during a feasibility study, a Public Information 

and Education Plan (PI&E Plan) which asks the following questions should be 

developed. This plan serves as the roadmap for the work of the Public Track. 

9 Who is the public? 

9 What is the message? 

9 When do we send the message? 

9 How is the message sent? 

9 What is the emergency response when trouble occurs? 

Well crafted information, strong media involvement, a speakers’ bureau, videos, 

citizen speakers, billboards, mailers, and public meetings, have all been used in 

effective public information programs. There is no one right approach as each 

community and sub-element within the community, may obtain its information 

and make decisions differently. In one, key decisions are made by leading 

business leaders. In another the council may make the decisions with little input. 

In one community environmental interests prevail; while in another, solving 

flooding is key. In some places environmental justice and the economically 

disadvantaged are primary, while for others it is not. Thus, it is important to 

understand the character and makeup of the community. 

The Program Track

This track assesses the basic problems, needs and goals, establishes program 

priorities, lays out a three to five year program, develops a costing of that 

program, and finally, sets up implementation steps. The program is the final 

determinant of the revenue plan, utility rate and rate structure, although due 

regard must be given to the customer’s willingness to pay for stormwater given 

other demands on citizens’ resources. 

The program is also what sells the utility concept, and it is the Program Track 

process which addresses the most fundamental of questions. How do we 

convince citizens and stakeholders of the need for an alternate funding source? 

Or, how do we craft a stormwater program that meets the needs of the local 

community without exceeding available funding? 

The program track begins by identifying the compelling case discussed 

previously (problems/needs). This is translated into three to seven key program 

priorities and the new stormwater program is formulated with a cost of service 

analysis, into a detailed three to five-year program plan. Longer term planning in 

less detail is also useful. 

Normally, for multiple jurisdiction utilities, the governance questions must be 

addressed in a preliminary way, early in the process. But it is normally prudent to 

address organizational and management issues at the end of the Program Track. 

It is better to first focus on the functions of the stormwater program rather on who 

 4-13 
might perform them. This defers potential organizational issues to the end where 

they are more easily resolved by the completed program planning information. 

The basic elements of a stormwater management program, which must be 

addressed by the Program Track, include both operational and financial 

functions. These might include: 

9 Operations and Maintenance 

9 Regulation and Enforcement 

9 Engineering and Planning 

9 Capital Construction 

9 Administration and Finance 

9 Regulatory Compliance 

9 Billing and Collections

The final assessment and planning step in the Program Track is the identification 

of the steps required to implement a utility. Those steps include a determination 

of the mix of revenue types to be used, the structure of the utility rate and the 

administrative functions which will implement and support the utility. These 

factors/elements are addressed in more detail in Chapter 2 of this guidance. The 

legal foundations of the revenue mix are addressed in Chapter 3 and are a 

principal focus of the Finance Track of the Utility Implementation Approach 

shown in Figure 4-3 of this chapter. 

The Finance Track 

The Finance Track sets up the legal and financial basis for the stormwater 

funding program. In this track the planning process examines legal parameters of 

the revenue options, explores and establishes policies which will govern the 

revenue program, analyzes factors which will determine the structure of the rates 

to be levied, determines the revenue needed, and develops ordinances needed 

to implement revenue policies, rates, enforcement and equities. 

It is in this track that fundamental questions concerning financing of the 

stormwater program are addressed. Who should pay for the stormwater 

program? What is the appropriate cost share to be borne by each benefited 

segment of the community? When or how frequently should payment occur; and 

what mix of revenue types or methods should be used to accomplish this 

payment such as fees, assessments, taxes, and/or utility? 

In addition to these policy questions, the Finance Track also addresses legal 

questions. What revenue authority already exists? What legal authority is 

needed to implement the desired revenue mix; and what legal foundation is 

needed to support the levy of each of the individual revenue types (nexus, 

benefits, service)? A more detailed discussion of these issues is found in 

Chapter 2 and 3 of this guidance.

 4-14 
It is very important to have established a logical and rational nexus for each 

revenue policy decision, for the rates to be charged, and for ancillary charges, 

credits, and offsets. The Finance Track establishes the myriad of basic financing 

policies needed. Then, based on appropriate legal authorities and foundations, 

and on program input, it moves from development of a revenue structure to meet 

the program needs, to a rate structure study and cash flow analysis and finally to 

an ordinance. 

It must be stressed that the Finance Track must work in support of the Program 

Track. The development and implementation of a stormwater funding program in 

general, and a utility in particular, must be intricately linked to the functions, goals 

and beneficiaries of the stormwater program to assure both equity and adequacy 

of the revenue levies. Revenue levies not consistent with benefits or services 

received; or not adequate to address identified heeds, will quickly lose 

community support. 

The Database Track

The Database Track has application to many stormwater revenue types, but is of 

foundational importance to the implementation of a stormwater utility. This tract 

has five main purposes: 

9 to determine the appropriate database and fields, 

9 to develop the master account file, 

9 to develop a mechanism to deliver the bill to the customer, 

9 to determine database maintenance processes, and 

9 to monitor customer service. 

The Database Track is that portion of the planning process in which the decisions 

made in the preceding tracks are used to create the administrative infrastructure 

which will compute the revenue levy for each parcel, deliver the bill, record the 

payment, and monitor the results. The process involves policy assessment and 

development, evaluation of database options, design of the master account file 

and selection of a billing and record system. A database can also provide the 

means to track complaints and service deficiencies. During the Database Track, 

the revenue program policy decisions made in the Finance Track are given form 

and application, producing an actual revenue levy on real properties. 

The master account file is a derivative of the rate methodology selected. For 

example, an impervious rate methodology requires the estimation of the 

impervious surfaces on each parcel. However, the availability of data could also 

influence the rate methodology decision. Should, for example, land use data be 

available then it might make sense to construct a rate methodology that uses 

development intensity factors to reflect the impervious fraction. In some cases 

the tax assessors file has sufficient number of relevant fields and accuracy to 

allow for a surrogate of development intensity without a lot of hand work. 

Addressing these decisions necessitates the connectedness of the Database 

 4-15 
Track and the Finance Track as shown in Figure 3. An expanded discussion of 

rate methodologies is found in Chapter 2. 

Some data sources may not be helpful. GIS coverage’s, not made to generate 

stormwater billings and “impervious coverage’s”, may not contain all the 

impervious areas of properties. Often they simply approximate buildings and use 

lines to outline parking lots. Also, parcel information, scanned from paper files, is 

often warped in relation to the real world. The database developer must search 

for the best available information or develop information from scratch. 

Newer methods involving satellite imagery are coming into popularity for larger 

areas, low tree cover, and limited budgets. There are, however, significant 

accuracy problems and the success of such a method depends on the image 

processing skills of the technician as much as technical specifications of the 

imagery. 

There are generally four options for billing systems. The most common is to use 

an existing utility system, such as water or wastewater. This has advantages in 

that stormwater looks like water and wastewater and the charge is clearly a fee 

for service, not a tax. Another advantage is that delinquencies are low, and it 

may be possible to turn off water for partial payment of the combined bill even 

though the customer may have intended to pay the non-stormwater portion of the 

bill. 

Billing the fee on a tax bill may have advantages and disadvantages as well. 

Using the tax parcel file has the advantage that stormwater is essentially a 

parcel-based function, creating a direct relationship to the vast majority of the 

parcels. A disadvantage is that the tax bill is mailed once per year for the 

majority of properties complicating program cash flow. 

The stormwater bill can be placed on another type of utility bill (e.g. electric) but 

that typically lacks a clear nexus. The last option is to create a stand-alone 

billing system. This has all the advantages of control and focus, and all the 

disadvantages of high cost and lack of ability to enforce collections. 

Recently local communities are looking at integrating the database support of 

many of their functions related to infrastructure and customer service. For 

example, some, or all of the following functions can use overlapping databases: 

9 Utility Billing systems 

9 Geographical Information Systems 

9 Dedicated Stand-alone Systems 

9 Maintenance Management Systems 

9 Customer Service Systems 

9 Complaint Tracking 

9 Accounting and Financial Management 

9 Property Tax Systems 

 4-16 
Depending on the rate methodology the following fields may be required in the

database: 

 Occupant Impervious area* 

 Owner Parcel ID number 

 Service address Runoff coefficient* 

 Property address Equivalent stormwater units* 

 Customer type Customer account number 

 Land use code* User fee 

 Gross area* Optional fee or information fields 

[* Factors which are required for various stormwater fee rate 

methodologies.] 

POLICY ISSUES

The implementation of user fee or utility based funding for stormwater has 

numerous policy implications. The policies aggregate around the key issue of 

deciding how service charges should be implemented and applied to specific 

properties in a consistent and fair manner. 

Timing of policy analysis is also important. Some issues must be decided early 

in the process, such as the extent to which a utility is to be the sole, primary, or 

secondary revenue source. Other issues will be addressed much later, such as 

the choice of the billing systems. Still other issues will not arise until the utility is 

functioning, such as the disposition of specific appeals and requested rate/levy 

adjustments. 

Thought must also be given as to who will make specific policy decisions. The 

Council formally adopts through ordinance or policy edict many of the major 

policies which guide the municipality’s stormwater revenue program. Although 

policy-making in the highest sense is reserved to the Mayor and Council, day-today policy decisions are, in fact, often made at several levels. . 

The Mayor may make some policy decisions based on Council positions. Other 

policy decisions are made by municipal management and staff administrators 

pursuant to general directives spelled out by the Mayor and Council. It is 

important to recognize the need for and functioning of this dispersed policymaking environment, and create a defined hierarchy for the review of important 

issues. The following is a sample of possible decision levels. Issues which could 

be decided at each level must be determined by each community. 

 4-17 
9 key staff and consultants 

9 other involved staff 

9 advisory committee 

9 manager’s office 

9 municipal council/mayor 

An initial screening of issues for the purpose of weighing their significance and 

determining the appropriate decision level must consider the following: 

9 impacts of policy decision alternatives on costs and manpower; 

9 the potential impact on the equity of the utility rate; 

9 the relationship of each specific issue to other policy issues; 

9 the priority and timing associated with the issue given the 

municipality’s objective of implementing alternative funding for 

stormwater management, 

9 the appropriate level(s) of municipal government at which the issue 

should be addressed and resolved. 

Policy issues in the development of a stormwater utility can be divided into those 

dealing primarily with program, funding, and billing technical issues. Following is 

a list of typical policy issues in these three tracks: 

Program Related Policy Issues (Program Track): 

Program Mission Major Program Priorities 

Program Service Description Service Area 

Extent of Service Levels of Service 

Stormwater Quality Strategy Organization and Staffing 

Privatization Interlocal Agreements and Responsibilities 

Relationship with other Programs Public Input or Advisory Groups 

Public Relations 

Funding Related Policy Issues (Finance Track): 

Types of Stormwater Services Funded Basis for Cost Distribution 

Prior Investment Future Use of Stormwater Systems 

Accounting Method Rate Methodology 

Basic Funding Methodology Modification Factors 

Secondary Funding Methods Overall Funding Strategy 

Credits Equivalent Residential Unit (ERU) Base 

Public Streets and Property State and Federal Property 

 4-18 
Billing Related Policy Issues (Database Track): 

Billing and Collection Methods New Stand-alone System 

Independent Database system Tie-in Modification of Existing Billing System 

Appeals and Adjustments Billing Period 

Collections and Delinquencies Water or Tax Bill Tie-in 

Property Liens Enforcement Procedural Issues 

Management Reporting Master Account File Development Process 

Use of other Databases Accuracy Requirements 

Number and Type of Data Fields Resolution Procedures for Discrepancies

Rounding and Ranges Impervious Area Methodology 

Impervious Measurement Accuracy Use of Street Centerline Data 

Customer Service Procedure Master Acct File Database Maintenance 

Information to Put on Bill and Updating Process 

Billing Cost Allocations Billing Owners or Tenants 

Case Exceptions Including: Undivided Interest, Common Areas 

 Multiple Owners Stormwater Only Accounts 

 Multi-Story Condominiums Use of GIS, Mapping or CADD 

Consolidated Billing 

SCHEDULE

Figure 4-4 illustrates a typical schedule using the four track process for utility 

establishment. The schedule shows that a comfortable time frame is 18 months 

from start to finish. The “M” letters indicate milestone meetings. 

 4-19 
Figure 4-4: Utility Implementation Schedule 

The critical path through the process can shift due to the requirements for citizen 

involvement, political timing, billing timing, and database development. 

 4-20 
APPENDIX 

EXAMPLE STORMWATER UTILITY PROGRAMS 

CITY OF BELLEVUE, WASHINGTON

Keynotes

3⁄4 The Bellevue stormwater management program was one of the first in the 

United States (established in 1974) and also the first to give equal 

consideration to water quality and quantity (flood) control. 

3⁄4 Bellevue’s Storm and Surface Water Utility provides a full range of capital 

infrastructure and operational services, primarily through its in-house staff. 

In addition to roadway drainage systems, it is responsible for an extensive 

stream system outside road rights-of-way. It also provides an erosion and 

sediment control program. 

3⁄4 The Bellevue Utility is governed by the City Council and administered by 

professional staff as part of a consolidated Utilities Department (water, 

wastewater, stormwater management, and solid waste). 

3⁄4 Funding of the Bellevue stormwater program is primarily derived from a 

user fee. 

3⁄4 Key funding policies include: 

o a user fee rate methodology based on gross property area and a 

factor reflecting the intensity of development of each property, with 

residential fees being discrete to each property and ranging from 

less than $3/month to more than $20/month; 

o retiring debt from an earlier very aggressive bonding program that 

constructed capital infrastructure improvements to the urban 

stormwater systems in the city. 

o A forward looking R& R funding program to replace infrastructure 

as it nears the end of its usable life (now pay-as-you-go R & R 

fund) 

Key operational practices include: 

 

 A-1 
o consistent, watershed-based, master planning of stormwater 

systems with emphasis on water quality and quantity control and 

aquatic wildlife habitat management; and 

o stormwater management functions performed by a staff responsible 

only for stormwater management, including NPDES permit 

compliance. 

Community Profile 

Bellevue is a city of 117,000 citizens. It is the business and cultural center of an 

area of more than 250,000 referred to in local parlance as “The Eastside”, in 

reference to its location on the east shore of Lake Washington across from 

Seattle. Two major highway bridges cross Lake Washington to connect The 

Eastside with Seattle and thousands of people commute across the bridges each 

morning and evening. Bellevue is just 10 miles by road from Seattle across 

either bridge, and has emerged in the past twenty years as a business center in 

its own right. It has a daytime population of 172,000, with approximately 131,000 

jobs, and is home to five of the top twenty-five publicly-traded business 

corporations in Washington State. Other major corporations such as Microsoft 

and Costco are headquartered in nearby Eastside communities. 

Bellevue is a relatively young community, both in terms of history and 

demographics, although its population is aging now that the suburbanization has 

spread even farther east toward the Cascade Mountains. The current median 

age is Bellevue is 37, up from 28 just 25 years ago. It is an affluent community 

with high quality of life expectations, and ranks second in Washington State in 

both retail sales and property values. The per capita income is approximately

$42,000/year. 

Founded as a community in 1869, Bellevue was incorporated as a city 

government in 1953, with a population of less than 3,000. As suburban sprawl 

emanated from Seattle and multi-lane highway bridges spanned Lake 

Washington, Bellevue quickly transformed from a market crop agricultural area 

(primarily fruits and vegetables) to the local business center for The Eastside 

area. It became a preferred address in the region and underwent rapid suburban 

development in the 1960’s. By 1970 the population had reached 60,000. 

The City expanded to its current 31 square miles through several annexations. 

As it grew, the City absorbed more than a dozen special-purpose agencies that 

provided local water and sewer services to the neighborhoods that now comprise 

Bellevue. These formed the basis of its Utilities Department. The City assumed 

governance responsibility for a full slate of urban community services, including 

stormwater management. However, other than storm sewer system construction 

improvements built by residential subdivision and commercial developers and in 

association with road construction projects, the community did very little 

stormwater management until about 1970. 

 A-2 
Fortunately, the City had developed so rapidly that most of its open streams 

remained and served as the primary drainage conduits for stormwater runoff. 

Unfortunately, by 1970 the increased runoff from new pavement and roof tops 

was overtaxing the capacity of the natural channels that had evolved over 

thousands of years. Runoff was also causing extensive erosion, sedimentation 

in the streams, pollution of Lake Washington, and local flooding problems. 

Formation Process 

The Bellevue Storm and Surface Water Utility is generally regarded as the first 

stormwater utility in the United States. It was established in January, 1974. A 

master account file was developed and service fees were initiated as the primary 

funding mechanism later that year. The Utility was charged with developing and 

implementing a comprehensive program strategy that would address both water 

quantity control and water quality protection. Its first priorities were to enforce 

erosion and sediment control standards and prepare watershed master plans for 

system capitalization in nearly a dozen small drainage basins in the city. 

Service Area 

The Bellevue Storm and Surface Water Utility is responsible for stormwater 

management, flood control, and erosion and sediment control throughout the 

City’s 31 square mile incorporated area. 

Role and Program 

Bellevue’s Utility has broad authority for all aspects of stormwater quantity and 

quality management. Much of the success the Bellevue Utility experienced is 

attributed to the detailed program strategy that was assembled by the staff 

following its formation in 1974 and continuously refined since. It has provided a 

clear, cohesive vision of the City’s objectives and priorities, and drove the 

transition in organization and funding. The program strategy proved to be 

critically important in retaining the support of the City Council when the initial 

service fee (1974) was challenged by citizens and businesses who perceived it to 

be “just another tax”. 

During the 1970s the Utility prepared a Drainage Master Plan (capital projects 

only) and initiated a program to acquire properties and easements and build the 

facilities identified in the Plan. The Plan consciously sought to preserve the open 

drainage system by limiting the peak flow of runoff into and through the streams. 

Engineering estimates suggested that significant savings would result if the open 

system could be retained by installing regional detention storage facilities at 

various points along the watercourses. That analysis proved correct, despite 

rapidly inflating land prices that drove costs up quickly. 

The regional detention control strategy was augmented by regulatory standards 

requiring on-site detention on new development and aggressive soil erosion 

control measures. The design standards reduced post-development peak runoff 

to approximately the same as pre-development conditions. Implementation of the 

 A-3 
Utility, plus the Master Plan project, justified the initial assembly of the City’s 

geographical information system (GIS), which was then incrementally expanded 

to serve other City programs. 

Other priorities were also addressed while the Master Plan was being developed. 

The Utility staff immediately became directly involved in land use and 

development reviews. Routine maintenance of drainage systems was 

significantly increased. In the late 1970s the City became the largest grantee of 

the National Urban Runoff Program (NURP), the Environmental Protection 

Agency’s first major investigative study of water quality/stormwater runoff 

relationships. This placed Bellevue on the leading edge of stormwater quality 

management in the United States. It also attracted cooperative projects and 

funding from other state and federal agencies, most notably for stream 

monitoring and system construction. The Bellevue stormwater program continues 

to be one of the most highly regarded in the United States. The Utility service 

fees have evolved through several iterations, and are now relatively more 

sophisticated and precise than most. 

Following the initial formation and implementation period, the Utility continued to 

expand its programs and build capital projects during the 1980s and 1990s. The 

infrastructure improvements identified in the initial Master Plan and subsequent 

updates were completed. A remedial maintenance program was initiated to 

repair and replace aging drainage systems before they failed. Aggressive 

development review and inspection efforts were instituted. Bellevue now has

eleven major regional detention sites with 650 commercial and 335 neighborhood 

detention facilities in residential subdivisions. There are also several hundred 

on-site detention systems located on commercial properties. Several of the 

regional and neighborhood systems are wetlands that contribute environmental 

benefits as well as flood control during storms. 

The maintenance program attained a fully preventive level of service within ten 

years. It was rigorously programmed, and remedial repairs became increasingly 

important as the systems aged and deteriorated. A permanent citizens’ advisory 

commission was established to provide the City Council with community 

perspectives on stormwater issues. Public information and education morphed 

into public participation, with “stream teams” composed of interested citizens 

conducting various projects and activities to protect and improve the City’s many 

small stream corridors. Volunteers are trained to collect scientific data at low 

cost for monitoring and adaptive management purposes. 

One incident dramatically demonstrates the success that Bellevue achieved 

through its utility. In 1990 the Puget Sound region in western Washington State 

was struck by an intense and extended rain event over the four-day Thanksgiving 

holiday weekend. More than $20 million of flood damage occurred in other parts 

of King County, which is the 1,200 square mile governance jurisdiction that 

includes Seattle, Bellevue, and other cities. Snohomish County (immediately

 A-4 
north of King County) had more than twenty bridges damaged. One of the multilane Lake Washington floating bridges was under repair at the time. Stormwater 

invaded the floating structure and caused it to sink in rather dramatic fashion. 

Replacement of the bridge cost over $200 million. 

In spite of such widespread problems during this extended storm event, 

Bellevue’s stormwater system worked so effectively during and following the 

storm that the City did not even have to call out its maintenance crews in 

response to any problems. Several of the Utility’s regional detention systems 

filled to their capacity, but they worked as designed together with the privately

owned commercial systems and overflow was minimal. The drainage and 

stream systems absorbed the impact without major damage. 

Governance Structure 

The Bellevue Storm and Surface Water Utility program is guided by policies set 

by the seven-member City Council. Overall city administration is directed by a 

professional city manager who supervises a number of major departments 

including Utilities. 

Organization and Staffing 

The stormwater management program in Bellevue is administered by the Utilities 

Department, which also provides water and wastewater management services. 

The staffing level for stormwater management has been relatively constant for 

the last decade, fluctuating between 45 and 50 full-time equivalent (FTE) 

positions. 

Funding 

The Bellevue Utility is supported primarily by periodic user fees charged to 

virtually all properties in the city, including the roads and highways. The Utility’s 

annual operating budget now is approximately $6 million. Capital expenditures

for the latest fiscal year (FY 2003/2004) were budgeted to be $2 million on 

projects having a total estimated cost of $21 million. Several of the capital 

projects are long-term, incremental efforts to stabilize lengthy sections of stream 

channels and replace aging infrastructure. Total annual expenditures from the 

Storm and Surface Water Utility fund are nearly $10 million, including debt 

service payments on capital improvement bonds. 

The initial service fee was based on impervious area, and billed only developed 

properties. In response to the citizen’s committee formed to examine the fee 

concept in 1975, the City shifted to a rate methodology based on gross area and 

development conditions of every property. As a result, both developed and 

undeveloped properties are charged for stormwater management in Bellevue. 

The City Council has also enacted several rate increases over the years as the 

program revenue requirements grew. 

 A-5 
Regardless of whether a property is in residential or commercial use, the rate 

methodology employs increments of one hundred (100) square feet to calculate 

the fees for each property, resulting in highly discrete charges. Service fees for 

single-family residential properties now range from less than $3 to more than 

$15/month, with a typical charge of approximately $10/month. The Utility is fully 

self-supporting and has never received allocations of general City revenues. A 

majority of its revenues are generated by the service fees, but the Utility also 

continues to receive federal and state grants and loans in support of specific 

activities and facilities. It also sponsors cooperative projects with private 

developers, other public agencies such as the local school district and 

neighboring general governments, and homeowners’ associations in residential 

neighborhoods. 

Inter-governmental Cooperation 

The Bellevue Utility works closely with other jurisdictions in the region, but its 

physical location on a ridge between two major lakes reduces the degree to 

which it shares watersheds with neighboring cities and King County. The 

development of one major regional detention area illustrates the type of 

cooperation that the Utility has been able to obtain from other agencies. The 

Municipality of Metropolitan Seattle (Metro) (now King County) wished to locate 

its Eastside Transit Maintenance Facility in Bellevue in the mid-1970s because of 

the site’s favorable central location. The City required that Metro (which 

coincidentally was also the wastewater treatment provider for the Greater Seattle 

area) preserve a small stream that traverses the property. Utility staff worked 

with Metro to optimize the use of the site for bus maintenance while also 

enhancing the stream corridor and installing containment controls to provide 

peak flow attenuation in the stream. Much of the collaborative effort was directed 

toward water quality management. Today, the utility works with other 

jurisdictions to develop capital facilities, protect water quality, manage lakes, and 

enhance aquatic habitat. 

Public Participation 

Public participation has been a hallmark of the Bellevue Utility since its inception 

in the late 1960s. A group of citizen activists approached the Bellevue City 

Council in 1969, requesting that the City government initiate studies and other 

actions to solve emerging drainage problems. They were especially concerned 

with the environmental impacts on the streams, their habitat, and riparian 

resources. The City Council appointed several of the citizens to an advisory 

committee to recommend a strategy for meeting with the challenge. Over the 

next three years the committee reported back to the City Council with a series of 

recommendations, the most significant of which (in hindsight) was that the City 

should establish a dedicated source of funding for its stormwater management 

program. The recommendations emerged as Bellevue’s Storm and Surface 

Water Utility early in 1974. 

 A-6 
In response to complaints about the initial user fees, a second citizen advisory 

committee was established that included several critics of the service fees, one 

of whom was challenging the Utility in court. That committee reviewed the initial 

decision to form the Utility. They concluded that the objectives, program strategy 

and policies were appropriate and recommended that the City continue with the 

service fee approach, but that citizens vote on the funding. This reassessment of 

the concept was pivotal in the ultimate success of the Utility concept in Bellevue. 

In their report to the City Council the committee cited the strategic plan 

developed for the Utility as a principal reason for supporting the concept. A 

series of advisory elections followed, which guided the evolution of the service 

fee funding methodology. 

The public’s participation in the work of the Bellevue Utility continues to be a 

hallmark of the community’s approach and a key factor in its success. A 

permanent Storm and Surface Water Utility Commission formed in the late 

1970’s. It now guides Utility policy and advises the City Council on program and 

funding decisions not only for stormwater management issues, but for other utility 

programs as well. Volunteer groups are sponsored by the Utility and provide 

support for stream protection, collection and disposal of household waste and 

hazardous materials (paint, etc), and multiple use of riparian corridors along the 

City’s streams. 

CITY OF CHARLOTTE/MECKLENBURG COUNTY, NC

Keynotes

3⁄4 The Charlotte/Mecklenburg County approach to stormwater management 

relies on centralized funding and regional programs for large systems 

combined with local management of minor stormwater systems and 

associated program elements. The County and individual towns have a 

high degree of self-determination in deciding the service level to be 

provided by local systems and programs, funding, and assignment of 

functional activities. 

3⁄4 Mecklenburg County provides the smaller towns with the option of a menu 

of available services, but the decision to use the County, City of Charlotte, 

in-house, or privately contracted vendors resides with the individual local 

entities. The City of Charlotte has a Phase 1 NPDES permit and the 

County and smaller communities have a Phase 2 permit. 

3⁄4 North Carolina statutes allow both counties and cities to establish 

stormwater utilities and adopt service fees to fund stormwater quantity and 

quality control efforts. However, a specific limitation in the statute 

prohibits creation of overlapping county and city utilities. Initially, the City 

of Charlotte established a utility. A year after, the utility was restructured to 

provide a countywide utility, with complementary programs run by the City 

and County to avoid any conflict with the statute. 

 A-7 
3⁄4 The Mecklenburg County Stormwater Utility is governed by the Board of 

County Commissioners and administered by professional staff. The City 

of Charlotte also has a substantial stormwater management program 

governed by the City Council and administered by the City Engineering 

and Property Management Department. Other City departments such as 

the Department of Transportation are also important players since they 

often provide maintenance of the stormwater systems in the roadways. 

City and town councils in the smaller communities in Mecklenburg County 

govern their local stormwater programs. 

3⁄4 Funding of the Charlotte/Mecklenburg County stormwater program is 

primarily supported by a composite stormwater service fee that includes 

both major (draining larger than one square mile) and minor (draining less 

than one square mile) components. The individual towns more often 

employ a blend of funding from several sources. 

3⁄4 Policies are adopted by the Board of County Commissioners and the city 

and town councils in the respective communities that are involved in 

stormwater management. Key funding policies include: 

o a composite regional major and minor service fee based on a 

consistent impervious area rate methodology; 

o County control of the major component of the composite service 

fee; and 

o local governance (county/city/town) control of the local component 

of the minor service fee. 

o the City of Charlotte has initiated a very aggressive bonding 

program to construct $198 million in improvements to the local 

urban stormwater systems in the city over five years. 

Key operational practices include: 

 

o consistent, watershed-based, planning of stormwater systems; 

o centralized stormwater quality management, including NPDES 

permits; and 

o a stormwater services menu provided to smaller entities by the 

County 

o Billing and collections and customer service are provided 

throughout all jurisdictions countywide by the City of Charlotte. 

3⁄4 Stormwater management staffing in the County and towns varies widely. 

Mecklenburg County and the City of Charlotte have relatively large and 

skilled staffs capable of managing both stormwater quantity and quality 

programs, while the smaller towns typically have few staff and rely on the 

County, City of Charlotte, or private vendors to provide contracted 

 A-8 
services. The combined Charlotte/Mecklenburg County staffing exceeds 

150 full-time equivalent positions. 

Community Profile 

Charlotte/Mecklenburg County is the largest urban center between Washington 

D. C. and Atlanta. Major businesses include banking, transportation, distribution, 

communications, and manufacturing. The City of Charlotte, Mecklenburg 

County, and smaller neighboring towns have collaborated in the development of 

one of the most highly regarded stormwater management programs in the United 

States. 

Mecklenburg County is the core of a six-county metropolitan area that has a total 

population of 1.5 million. Approximately one half reside within Mecklenburg 

County, with 650,000 people residing in the City of Charlotte. Only 70,000 

Mecklenburg County residents live in areas that are not within incorporated cities 

or towns. 

The County encompasses about 526 square miles, nearly 280 of which are in 

Charlotte. Charlotte and the smaller towns in the County have adopted policies 

for on-going annexation. It is anticipated that there will be no remaining 

unincorporated areas of the County within a decade or so, but County 

government will continue to provide designated services such as floodplain 

management county-wide. 

Mecklenburg County established a storm drainage district early in 20th century 

which built and maintained large, open-channel drainage systems to serve those 

portions of local watersheds with a tributary area of more than one square mile. 

Improved channels were provided throughout the County, regardless of whether 

the channel was located in an incorporated city or town government or in the 

unincorporated area. Of course many of the channels crossed the jurisdictional 

boundaries of the cities, towns, and county. 

Improvement and operation of drainage systems to serve areas smaller than one 

square mile in the incorporated jurisdictions were left up the local government. 

The City of Charlotte and the smaller towns were nominally responsible for the 

small watershed systems. The County improved and maintained the smaller 

systems in the unincorporated area. Many of the smaller systems were installed 

by developers as residential subdivisions and commercial projects were 

constructed. This approach was employed for over seventy years, with mixed 

success. The larger channels tended to be funded adequately and were 

improved from time to time, while the smaller systems were largely ignored 

unless specific problems developed. 

Today Mecklenburg County and the City of Charlotte manage different but 

complementary stormwater programs. The City and County work together in 

order that services to the community will not be duplicated. The County remains 

 A-9 
responsible for managing FEMA regulated floodplains and their channels countywide. This is comprised of a network of "named" large creeks (like McMullen 

Creek, Little Sugar Creek, and Briar Creek) that drain watersheds larger than one 

square mile. The City of Charlotte and the smaller towns are responsible for 

maintaining the smaller creeks and tributaries that feed into the large creeks. 

Both the county and town stormwater programs provide services for drainage 

pipes, ditches and drains on public property and within easements on private 

property in their respective jurisdictions. 

Formation Process 

Formation of the Mecklenburg County stormwater utility involved a relatively 

complex, and occasionally contentious, process that spanned over three years. 

This was in large part a function of local politics, but the North Carolina legislative 

authorization for stormwater utilities heavily influenced the process. 

Initially, the County and City of Charlotte attempted to cooperatively identify a 

mutually agreeable approach to instituting a utility. An advisory committee 

comprised of County, City, and diverse interest group representatives met for 

more than a year to assess how local needs might best be addressed. 

Unfortunately, they reached a stalemate regarding which entity should be the 

lead management entity. This reflected the past history and differing needs of 

the County and City. 

Since the early 1900’s, Mecklenburg County had provided and maintained 

drainage improvements along creeks throughout the County below the point 

where the tributary area totaled 640 acres (one square mile). Such regional 

systems were locally termed the “regulated floodways”. Drainage systems 

serving smaller watersheds in the unincorporated areas were also the 

responsibility of the County, but the cities and towns were responsible for the 

local drainage systems within their jurisdictions. The City of Charlotte 

Department of Transportation had maintained its urban stormwater systems 

associated with roads for many years, but drainage systems located outside road 

corridors had not been aggressively managed or maintained. When discussion 

of the utility option began in 1989, the County’s principal priority was to enhance 

its regional systems, while the City’s priority was to improve the local drainage 

systems. Both entities were concerned about their upcoming NPDES permits at 

that point. 

North Carolina legislation was adopted in the late 1980’s which allowed counties

and cities to establish stormwater utilities. However, it specified that only one 

entity could establish a utility where two or more local entities provided drainage 

systems and services. Because Mecklenburg County managed the regulated 

floodways throughout the County, including areas in incorporated cities and 

towns, the County staff wished to have a utility that was county-wide. However, 

there was some reluctance among the County Commissioners to lead that 

approach. Once it was clear that a cooperative approach was not moving 

 A-10 
forward, the City of Charlotte determined that it could not defer its solutions and 

would institute a stormwater utility to support its local drainage system programs 

including funding for compliance with Phase I stormwater requirements. The City 

utility was instituted by the City Council and service fees were initiated in 

January, 1993. 

Once it became clear that the City was proceeding independently, the County 

Board of Commissioners determined that it would proceed with formation of its 

utility. This caused both entities to revisit the issue of a single county-wide utility. 

It was determined that the County utility would supplant the City utility as a legal 

entity when it was formally instituted in 1994. The structure and control of 

budgets, rates, and fees was a key to this agreement. This process was 

facilitated by the fact that the County and City had retained the same consultant 

team to assist both parties from the beginning of the process. That enabled the 

entities to arrive at consistent governance, rate, and program decisions, and 

implementation of the master account files and billing systems was eased. 

Another aspect of the County and City of Charlotte negotiations involved the 

provision of services in the smaller towns that surround Charlotte. In order to 

obtain their agreement to participate in regional solutions and application of 

County utility service fees within their jurisdictions, the County agreed to extend 

control over many key policy issues such as rates to their elected Councils. 

A permanent, nine-member Storm Water Advisory Committee (SWAC) is 

appointed by the Charlotte City Council, Mecklenburg County’s Board of 

Commissioners, and Town Councils of Cornelius, Davidson, Huntersville, 

Matthews, Mint Hill, and Pineville. SWAC members represent diverse 

neighborhood, business, institutional, and environmental interests. 

Service Area 

The total area of Mecklenburg County is approximately 526 square miles. The 

City of Charlotte is approximately 280 square miles of the County, while the 

smaller six towns collectively contain (or maintain through Extra Territorial 

Jurisdiction) the remaining area of the County. North Carolina annexation laws 

allow aggressive annexation policies to be pursued by cities and towns. At the 

time the stormwater utility was being formed Charlotte and the satellite cities and 

towns had reached separate agreements on their respective spheres of influence 

which will control future annexations as urban/suburban development occurs. 

The County remains essentially a rural services provider, and the city and towns 

are urban services providers. Annexations tend to occur each year to two as 

urban/suburban development spreads into the unincorporated areas. This has 

directly influenced the initial division and gradual shift of stormwater management 

responsibilities. 

Pursuant to state legislative limitations, the Mecklenburg County stormwater 

utility is the single, county-wide stormwater utility and encompasses the 

 A-11 
incorporated areas by inter-governmental agreement. The individual cities and 

towns are stormwater service agencies within their respective jurisdictions, but 

utility service fees to support their programs are levied by the Board of County 

Commissioners. 

It was decided that the County and, to a lesser degree, the City of Charlotte 

would support the smaller cities and towns stormwater management efforts by 

offering a “menu” of services to them. Since Mecklenburg County remained 

responsible for the regional drainage facilities throughout the County and also for 

the rural drainage systems in the unincorporated areas, it was judged to be best 

suited to provide those services to the smaller towns. Since the City of Charlotte 

performs street drainage maintenance, it was determined that it would offer 

similar services to the smaller cities and towns, though most currently maintain 

those systems in-house. (It should be noted that county governments in North 

Carolina do not operate road systems. There are state highways and city streets 

and highways only – no county roads. Thus, the State of North Carolina 

Department of Transportation is an important player in road-associated 

stormwater management in unincorporated areas of the state and is also 

responsible for some roads within incorporated cities and towns.) 

One of the most notable differences in stormwater services in 

Charlotte/Mecklenburg is that systems located outside road rights-of-way and 

easements are also maintained by the City if “public water” is present. That 

includes runoff from any public street or property. This policy enables the City to 

actively manage nearly all of the drainage systems rather than just those 

components located in roadways. As a result, the County and municipal 

stormwater programs apply much more effort to stream protection and 

enhancement than in most communities. 

Role and Program 

Mecklenburg County and the City of Charlotte both continue to have substantial 

stormwater management roles and programs. The County has an engineering 

and operational staff geared to management of major drainage systems serving 

watersheds of more than one square mile and rural drainage systems serving 

smaller watersheds in the unincorporated areas. The City of Charlotte has a 

stormwater engineering staff in the City Engineering and Property Management 

Department and an operational staff in its Department of Transportation. 

Charlotte has a Phase 1 NPDES permit, which is supported by contracted 

County forces that provide water quality monitoring and data management. The 

County and towns have a Phase 2 permit. 

Although the County focuses its program on the larger creeks, the role of both 

agencies is primarily urban stormwater management simply because the area is 

now extensively urbanized. Flood protection is an important objective, but the 

area is subject only to small drainage system flooding rather than major river 

flooding along the Catawba River, which traverses the County. The Catawba is

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controlled by a series of dams and impoundments such as Lakes Norman and 

Wylie. The County’s efforts focus on the regulated floodways of the major creeks 

throughout the County. Drainage systems in the unincorporated areas that are 

not within road corridors are also managed, but these are a lower priority. The 

State of North Carolina Department of Transportation is responsible for roadway 

drainage systems throughout the unincorporated area, and for some systems in 

the incorporated cities and towns. 

Mecklenburg County recently consolidated several previously dispersed 

functions into a Land Use and Environmental Services Agency (LUESA). Its 

scope of responsibility includes floodplain management, stormwater services, 

water quality, land development, zoning, groundwater protection, on-site 

wastewater management, private water well permits, and others that were 

integrated in a Water and Land Resources organization. The County’s objective 

in consolidating these programs in one operating unit is to ensure a clean and 

livable environment through the protection and enhancement of water and land 

resources. 

The County’s program also provides floodplain management county-wide. 

Federal flood insurance provisions mandate that floodplains be delineated where 

tributary watershed areas exceed 640 acres, which corresponds to the drainage 

area definition employed by Mecklenburg County for the major streams 

management program throughout the cities, towns, and unincorporated areas. 

The program relies on regulations that limit intrusions into the floodplain. The 

County’s Water and Land Resources group maintains the flood insurance 

mapping for the entire County. Improvements to and maintenance of the major 

drainage channels carried out by the County provide effective flood control during 

most storms. The County also performs floodplain and stormwater service 

inspections for the cities and towns and is responsible for the small drainage 

systems in unincorporated areas. 

The City of Charlotte program focuses on local drainage systems both within and 

outside road corridors. Its program heavily oriented toward infrastructure 

management, and the City recently initiated a capital improvement program that 

will invest $198 million in construction of system betterments to the local urban 

stormwater systems over the next five years, utilizing bonds and service fees. 

Governance Structure 

Mecklenburg County has a single, county-wide stormwater utility governed by the 

nine-member Stormwater Advisory Committee created for the purpose of levying 

varying service charges across the County and seven municipal jurisdictions. 

The utility service fees within incorporated areas are levied pursuant to intergovernmental agreements with the respective city and town councils. Decisions 

on program content, level of service fees, and how to provide service (in-house, 

inter-agency, outside contract, etc) in the incorporated areas are the province of 

the cities and towns. The seven city and town councils set the stormwater service 

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fees applicable to improvement and maintenance of the smaller systems within 

their limits, and the County Council adopts them as part of their rate 

methodology. 

This stormwater management governance structure has now been in place for 

over a decade, and has enabled all of the local jurisdictions to perform 

stormwater management at the level desired by their local elected officials. Most 

of the smaller towns simply use the same rates that the County applies in the 

unincorporated area, although the Town of Davidson has opted to charge a lower 

service fee. 

Organization and Staffing 

The organization and staffing of the stormwater management units in 

Mecklenburg County, the City of Charlotte, and the smaller satellite cities and 

towns varies greatly. The County and City of Charlotte have in-house staffs of 

approximately thirty and seventy-five people (respectively) with the full range of

engineering and operational skills required to administer their respective 

programs. Both also make substantial use of outside consultants and 

contractors. In addition, the City stormwater program pays the City’s annually to 

maintain drainage systems located in roads. The smaller towns’ stormwater 

staffs range from a portion of one full time equivalent position to several people 

dedicated to the stormwater management function. They rely heavily on the 

County, City of Charlotte, and outside contractors for engineering and operational 

support. Day to day activities associated with NPDES compliance, including 

extensive monitoring, is provided primarily by the County. 

The differences in and dispersion of responsibilities among the County and the 

towns has resulted in the creation of some innovative concepts. For example, 

the City of Charlotte developed a program to expedite construction of small 

capital projects and remedial repairs. A list of pre-qualified local construction 

firms is maintained, and unit price bids are obtained annually for certain common 

activities and materials. When a complaint about a drainage problem is received, 

a City stormwater inspector determines the priority ranking of the problem. If it is 

in a high priority category (such as home flooding, street flooding, or other safety 

issue), a qualified vendor on the list is called in, any required engineering is done 

immediately (often in the field), and a work order is issued. This program 

enables the City to respond to many complaints within 30 to 60 days, which has 

gained high community and City Council approval. The County has a similar 

program. 

Funding 

The County stormwater utility service fee is the primary source of funding for 

stormwater management in Mecklenburg County. The total stormwater budget 

for all entities in Mecklenburg is over $85,000,000. A large part of this is for 

capital betterments to the systems primarily within the City of Charlotte. The 

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City’s budget for capital projects in the current fiscal year is over $40 million, and 

the City’s annual stormwater operating budget is an additional $32 million. 

A consistent impervious area rate methodology is used throughout the County, 

with a flat rate for single-family detached residential properties and an 

equivalency unit of 2,613 square feet of impervious coverage applied to all other 

properties. Single-family residential customers are billed for one equivalent unit. 

The equivalent unit flat rate applied to single-family residential customers for the 

regional component of the program is $1.06/month throughout the County. The 

local stormwater program elements provided by the County and City and towns 

are funded by a separate rate component. 

Because Mecklenburg County has a composite fee comprised of the regional 

system component and local fees determined by the City and towns, the rates 

vary by jurisdiction. Charlotte and Mecklenburg County have a dual flat-rate user 

fee for single-family residential properties, with the break being at 2,000 square 

feet of impervious coverage. The City’s current single-family charges are 

$5.18/month and $6.72/month. The County’s are $3.33/month and $4.03/month 

for the local component of the rates in the unincorporated areas. The local 

component of the rates applied in the other towns range from $.30/month to over 

$2.00/month. 

Additional funds have also been appropriated for stormwater management by 

many of the entities, resulting in some novel blending and dedication of 

resources. For example, even after its utility service fee was adopted, the 

Charlotte City Council decided to continue to appropriate approximately the same 

amount from general revenues for stormwater management as was previously 

budgeted (about $5 million annually). Those funds were specifically assigned to 

water quality programs to avoid a potential problem within the state authorizing 

legislation (which was later rectified by statute). This allowed the City’s initial 

service fee rate to be approximately sixteen (16) percent lower than would 

otherwise have been required to meet the cost of services and facilities. After 

the stormwater utility had been in place for three years, one-half of the general 

revenue support for stormwater management was incrementally reduced over a 

four year period, which transformed the City’s general government capital 

program. The City continues to make a general fund contribution to the 

stormwater program.. 

Inter-governmental Cooperation 

The strong emphasis on local control of the small-watershed programs combined 

with the regional responsibilities of Mecklenburg County has resulted in a great 

deal of collaboration and mutual support by the participating entities. Financial 

management offers a good example. Administration of the service fee master 

account file billing and collection is provided by the City of Charlotte’s Finance 

Department. Accounting for the individual programs is performed separately by 

each entity. 

 A-15 
This approach extends to engineering and operational functions as well. The 

County and City of Charlotte perform master planning and engineering for 

watersheds and drainage systems, often by employing outside consultants. 

Because the local watersheds cross many jurisdictional boundaries, this function 

commonly involves and benefits the smaller towns as well. The City of Charlotte 

is undertaking a $198 million capital projects program that will construct new 

drainage systems, improve existing facilities, and repair known deficiencies over 

five years. Some improvements will be done outside the City to attain the most 

efficient solutions to problems within Charlotte, resulting in incidental service 

benefits to other entities. The County and City of Charlotte operational forces 

also provide various services to the smaller towns per operating agreements or 

on an ad hoc basis at their request. The County performs over $1 million of 

monitoring, analysis, and data processing services for the City’s Phase 1 NPDES 

compliance program. The water quality programs, including NPDES compliance 

efforts, also involve the County, City of Charlotte, and satellite communities in 

many cooperative efforts such as public education. 

The City and County have also consolidated stormwater customer service. 

Service requests are coordinated through a single telephone contact number, 

[704] 336-RAIN (which translates to [704] 336-7246). Regardless of which local 

governance jurisdiction a person resides in, he or she can file complaints or 

inquiries and receive service assistance from the customer service center. 

The Charlotte/Mecklenburg stormwater program receives support from several 

federal and state agencies for various program components. For example, the 

United States Geological Survey (USGS) operates a dense hydrologic datacollection network of seventy two (72) rain gauges and forty five (45) stream flow 

gauges within the city and County. The network of gauges provides valuable 

data for the documentation and interpretation of water-resources information, 

including rainfall and flooding events. During a rain event, data is transmitted 

from these gauges to base stations located at USGS and the Charlotte 

Mecklenburg Government Center (CMGC) where developing flood conditions are 

monitored by emergency services staff. In addition to rainfall and stream level 

data, four stations in the system are also set up to continuously collect water 

quality indicators such as temperature, conductivity, PH and dissolved oxygen

levels in a stream. The cooperative program with the USGS has been in place 

without interruption since 1961. 

Public Participation 

Perhaps one of the most outstanding features of the Charlotte/Mecklenburg 

experience has been the high level of on-going public participation in the 

stormwater utility program from its formative stage. The County and City of 

Charlotte assembled a community advisory group and a technical guidance 

committee to assist with the feasibility investigation when they first considered a 

combined program. The City continued that effort with a committee of more than 

 A-16 
twenty persons representing diverse interests as it formulated its initial utility 

concept. The County then initiated its own utility implementation effort, again 

with support and guidance from a committee. 

Prior to its initial stormwater utility billing, the City conducted an extensive (and

costly) public education program to explain the purpose of the stormwater utility 

and service fee concept. They also introduced the program to the media in the 

city with factual materials, and obtained strong support from the editorial board of 

influential local newspaper. Prior to the initial billing, notifications were sent to 

the largest ratepayers and explanations of the fee and its associated credit 

system were provided in several general and personal meetings with businesses 

and the local Chamber of Commerce. As a result, the Chamber of Commerce 

supported the utility program with its membership. A series of public information 

brochures were prepared and placed in public buildings, and articles highlighting 

drainage problems in the city were placed in the print media. A guest 

commentary article authored by the City was printed in a weekend edition of the 

major Charlotte newspaper. 

After a detailed study of billing alternatives, the City decided to append the 

stormwater service fee to the Charlotte/Mecklenburg Utilities Department water 

and sewer billing as a separate line item. On the day the first stormwater service 

fee billings were mailed, a ground-breaking ceremony was held for a construction 

project to resolve a highly-visible, long-standing drainage problem. It received 

heavy coverage by local television news programs. The message of the day was 

that the City had begun to address its substantial backlog of known drainage 

problems, “And, by the way, you (i.e., the public) will be receiving a new line item 

on your utility bill to support this effort”. It might have easily been “There’s a new 

fee in town. What are they doing with your money?” 

The City also prepared very well for public response to the initial service fee 

billing by assembling and training a cadre of special customer service agents,

retained through a temporary employment agency. A contact telephone number 

was printed on the billings to direct calls to this group of specialists, relieving the 

potential burden on the utility billing customer service staff that normally 

responded to water and sewer billing inquiries. The twelve special customer 

service agents were retained for sixty days, or two full billing cycles. As the 

inquiries tapered off, the number of special agents was reduced accordingly, with 

all inquiries eventually being shifted to the in-house customer service staff, who 

had also received training on the proper responses to various questions. 

In total, the City of Charlotte spent approximately $250,000 (in the early 1990s) 

to educate the community about the local stormwater needs and utility program, 

and prepare for the initial service fee billing. This represented approximately two 

weeks of the utility service fee revenue stream at that time, but resulted in a high 

level of public acceptance. There was (of course) some opposition by taxlimitation advocacy groups, but the high level of accountability provided by the 

 A-17 
dedication of funding dispelled most of their objections. Within two years, a City 

Council member who represented that interest tax-limitation group stated publicly 

that, if every City program was as well run as efficiently and responsively as the 

stormwater utility, there would be no need for tax-limitation advocacy. 

The high level of community education and involvement continues, with many 

educational materials, activities, and actively-involved support groups. The City 

commonly provides hyetographs from its rain gauging network on its website 

following severe rainfall events that cause flooding. This has educated the 

general public regarding the high variability of intense thunderstorm rainfall that 

occurs across Mecklenburg County, and reassures the public that the staff is 

aware of what is happening. The City’s stormwater capital improvements 

program, funded in large part by sale of bonds, also features extensive public 

education and participation programs, such as Adopt-A-Stream and Storm Drain 

Marking. 

CITY OF TULSA, OKLAHOMA

Keynotes

3⁄4 The Tulsa Stormwater Management Utility was founded in response to a 

devastating one-day urban drainage system flood that killed 14 residents 

and did nearly US$200 million damage to public and private properties in 

1984. 

 

3⁄4 Tulsa’s Stormwater Management Program provides a full range of capital 

infrastructure and operational services. In addition to roadway drainage 

systems, it is responsible for an extensive stream system outside road 

rights-of-way. The City has a Phase 1 NPDES permit. 

3⁄4 Since forming its Utility, Tulsa has received over $100 million in federal 

support for capital infrastructure improvements, removal of structures from 

flood-prone areas, and hydrological data gathering. 

3⁄4 Funding of the Tulsa day-to-day stormwater program is primarily derived 

from a user fee. 

3⁄4 Key funding policies include: 

o a user fee rate methodology based on the impervious area of each 

property, with residential fees being a single rate; 

o use of general obligation bond sales and sales tax revenues to fund 

construction of capital infrastructure improvements; and 

o aggressive pursuit of federal grants and loans to supplement local 

resources. 

 A-18 
Key operational practices include: 

 

o watershed-based master planning of stormwater systems 

throughout the City, with emphasis on flood control; and 

o stormwater management functions performed by in-house staff, 

including NPDES permit compliance. 

Community Profile 

The City of Tulsa was incorporated as a municipality in 1898. With the discovery 

of oil in nearby Red Fork in 1901, Tulsa grew quickly and reached a population of 

more than 7,000 by 1907. After Oklahoma became the 46th state in the United 

States in 1907, the City voters adopted its first city charter on July 3, 1908. The 

City was governed by three elected commissioners from 1909 through 1989,

when the voters amended the charter to adopt a mayor/council form of 

government. The Mayor is now elected every four years (at large) and nine City 

Council members are elected to two-year terms from geographic districts. 

Tulsa lies in the heart of a fertile forested region of rolling hills in northeastern 

Oklahoma. It is the second largest city in Oklahoma, located 90 miles northeast 

of the state capital, Oklahoma City. The average annual rainfall is thirty-nine (39) 

inches. The region is sometimes referred to as “Tornado Alley” in recognition of 

the severe storms that often occur in the Spring. Violent windstorms are often 

accompanied by extraordinarily intense rainfall, which has been a key factor in

Tulsa’s stormwater management problems and search for solutions. 

The land area of the City today is approximately 198 square miles. It has a 

population of 392,000. The economy of the community is highlighted by higher

education (seven universities), energy, telecommunications, and 

transportation/warehousing. Tulsa has an in-land deep water port located on the 

McClellan-Kerr Arkansas River Navigation System, offering a Foreign Trade 

Zone, two industrial parks and liquid and dry cargo storage. 

Tulsa has grown up with flooding. Some consider it a “poster child” example of 

the stormwater management struggles that local governments experience. Many 

of the causes of Tulsa’s problems are a function of its location: the city is on a 

major river (the Arkansas), in a region of violent storms, and was initially 

developed on the American frontier, where one had a right to do as he (or she) 

wished with the land - including building structures in inappropriate, flood-prone 

locations. 

Local flood records are sparse before 1900. In 1908, only a year after statehood, 

Arkansas River flooding at Tulsa caused $250,000 in damages (over $25 million 

in 2004 dollars). By 1920, the town had outgrown its raw, boomtown youth. As

riches mounted from the oil industry and investors and speculators poured in, 

Tulsa grew into a wealthy city of 72,000. But development edged ever closer 

and closer toward the river banks. On June 13, 1923, the Arkansas River 

 A-19 
flooded Tulsa's waterworks, caused $500,000 in damages ($20 million in 1994 

dollars), and damaging homes leaving 4,000 citizens homeless. City fathers 

responded with Tulsa's first land-use plan, which envisioned upland boulevards 

and housing. In the lowlands, such as the Mingo Creek riparian stream corridor 

east of town, the plan indicated there would be generous parks and recreational 

trails. 

Significant flooding occurred again in 1943. In response to the flooding, the U. S. 

Army Corps of Engineers (COE) built levees around Tulsa's oil refineries along 

the Arkansas River as a World War II national defense measure. By 1950, in the 

post-war building boom, housing fanned out onto the floodplains to the south and 

east of the downtown area. Land that had periodically flooded with little harm 

now was awash in wave after wave of development and, periodically, urban 

flooding. By the late 1950's, flooding of newly developed subdivisions along the 

Arkansas River spurred calls for flood control. In 1964, the COE completed 

Keystone Dam on the Arkansas River, fifteen miles upstream from Tulsa. For 

years to come, Tulsans would believe that the Arkansas River was forever 

tamed. 

Tulsa enjoyed another economic boom based on energy resources in the 1960s, 

when the city's population grew 25 percent. Tulsa's rapid growth resulted in the 

paving and piping of vast areas of pastures and meadows, and new buildings

continued to spill into the lowlands along the creeks and streams that etch the 

area. The rapidly urbanizing Mingo Creek watershed was annexed to the city in 

1966. Localized floods struck every two to four years during the 1960s and early 

1970s, but the response was classic “flood relief”: emergency response and 

recovery, reconstruction as quickly as possible, and denial of the possibility that 

damaging floods could reoccur. Victims petitioned for neighborhood flood 

control, with limited success. 

A flood in the Spring of 1970 caused $163,000 in damages in the rapidly 

developing Mingo and Joe Creek watersheds. The City responded by joining the 

federal government’s National Flood Insurance Program's (NFIP) "emergency 

program" and promising to adopt federal floodplain regulations. In August 1971, 

the NFIP issued its block rate maps. A month later, floods hit Flat Rock, Bird and 

Haikey Creeks inundating many suburban neighborhoods once again. In 

December that year, Bird Creek flooded again. Tulsa joined the NFIP's "regular" 

program, adopted a new 100-year flood standard, and promised to regulate 

floodplain land use. 

In April and May, 1974 floods left $744,000 in damages (over $6 million in 2004 

dollars) on Bird Creek. Violent storms June 8 of that year caused widespread 

flooding on Joe, Fry, Haikey and Mingo Creeks, with more than $18 million in 

damages ($80 million in 2004 dollars). On September 19, 1974 Mingo Creek 

flooded yet again. For some citizens, it was the third flood in less than a year. 

Angry, drenched victims waded out of the floods to demand help from City 

 A-20 
officials. They contended the City wasn't enforcing its NFIP regulations. They 

tried to halt development, to avoid deeper flooding until existing problems could 

be solved. Developers objected strenuously. Thus began a community debate 

over floodplain management, locally called "Tulsa's great drainage war," that was 

destined to last more than a decade. The city responded with a plan to widen 

part of Mingo Creek, including clearance of 33 houses in the most flood-prone 

area. The houses were removed just before the next flood in May, 1976. 

The May, 1976, flood marked a milestone in Tulsa's search for solutions. A 

three-hour, 10-inch deluge was centered over the headwaters of Mingo, Joe and 

Haikey Creeks. The resulting flood killed three citizens and caused $40 million in 

damages ($140 million in 2004 dollars) to more than 3,000 buildings. By this 

time, the victims were becoming skilled lobbyists and gathering sympathizers 

citywide. They virtually stormed City Hall to demand solutions. Newly elected city 

commissioners responded with a wave of actions. They enacted a floodplain 

building moratorium; hired the city's first full-time hydrologist; developed 

comprehensive floodplain management policies, regulations and drainage 

criteria; enacted stormwater detention regulations for new developments; 

instituted a fledgling flood alert and warning system; and began master drainage 

planning for major creeks. In 1978, an earth change (erosion and sediment 

control) ordinance was also adopted, giving the city control over alterations to 

Tulsa's landscape, including floodplains and stream channels. 

In the early 1980s the federal United States government developed the federal 

Inter-agency Hazard Mitigation process to curb repetitive flood losses. After 

flood disasters, federal teams were dispatched to identify hazard mitigation 

opportunities, i.e., ways to make the response to each disaster reduce the scope 

of the next one. The mitigation concept focused on correcting the causes of 

losses, including removing, raising, or flood proofing the most vulnerable of the 

damaged buildings. Tulsans worked with the Federal Emergency Management 

Agency (FEMA) to develop the process. Tulsa's early exposure to the new FEMA 

mitigation program was to have a significant impact on the city's response to 

future floods. 

On the three-day weekend marking the Memorial Day holiday in May, 1984, the 

worst flood in Tulsa’s history struck. After a muggy Sunday a stalled cool 

weather front produced thunderstorms that dumped some fifteen (15) inches of 

rain overnight in just twelve hours. The rainfall was centered over the Mingo 

Creek watershed, but also extended across most of the city. The results were 

disastrous. The flooding killed 14, injured 288, damaged or destroyed nearly 

7,000 buildings, and left $180 million in damages ($425 million in 2004 dollars). 

The Mingo Creek corridor alone accounted for $125 million of the damages. It 

was truly a localized, urban stormwater system flood. Local streams flooded 

while the nearby Arkansas River remained well below flood levels. 

 A-21 
Problems continued in the years following despite formation of Tulsa’s 

stormwater utility in 1985. In 1986, a major flood of the Arkansas River tested 

the new stormwater management program. It also served as a reminder of the 

finite protection provided by the Keystone Dam upstream from the city. Between 

September and October 1986, unrelenting upstream rains filled the Keystone 

Reservoir to capacity, forcing the COE to release water at the rate of 310,000 

cubic feet per second. Downstream flooding was inevitable. At Tulsa, a privately 

maintained levee failed, causing $1.3 million ($5million in 2004 dollars) in 

damages to 64 buildings. The City fielded its hazard-mitigation team and cleared 

13 substantially damaged structures, and more widespread damage was 

avoided. 

Formation Process 

A newly elected mayor and street commissioner had been in office for only 19 

days when the Memorial Day flood struck in May, 1984, but both knew the issues 

well. In the darkest hours of their community's worst flood, they pledged to make 

their response reduce the likelihood that such a disaster would ever be repeated. 

Before daylight, they had assembled the city's first Flood Hazard Mitigation Team 

to develop the City's strategy. Within days, a new approach to Tulsa flood 

response and recovery was born. 

The flood response effort was only the beginning. A unified stormwater program 

was created, with City leaders committing to make Tulsa flood-safe. As 

ultimately completed, the program included relocation of 300 flooded homes and 

a 228-pad mobile home park, $10.5 million in flood control works, and $2.1 

million for master drainage plans. The total capital program topped $30 million, 

mostly from local capital sources, flood insurance claim checks, and federal 

funds. 

The devastation of the 1984 flood persuaded Tulsans that a coordinated, 

comprehensive stormwater management program was needed from the rooftop 

to the river. A Department of Stormwater Management was established in 1985, 

centralizing responsibility for all city flood, drainage, and stormwater programs. A 

stormwater utility fee was established by ordinance in 1986 to fund the program. 

The utility fee ensured stable funding for maintenance and management, 

independent of fickle political winds. The service fee ordinance allots all fee 

revenues exclusively for floodplain and stormwater management activities. Over 

several years an extensive system of recreational greenways was created along 

the Mingo Creek and other streams, providing bicycle and walking paths as well 

as green space areas. When the Memorial Day flood devastated Tulsa in 1984, 

the City had 57 detention ponds. By 2000, there were 85 detention ponds plus

many other stormwater facilities including improved conveyance channels. 

Service Area 

The Tulsa Stormwater Utility is responsible for stormwater management 

throughout the City’s 198 square miles. 

 A-22 
Role and Program 

Simply establishing a stormwater utility could not instantly correct Tulsa’s 

stormwater and flooding problems. A comprehensive, long-range stormwater 

program strategy was formulated by the utility staff, coupled with extensive 

capital infrastructure master planning during the 1980s. The City’s objective was 

to manage stormwater both within public rights-of-way and easements and along 

the many creeks that drain the hilly terrain of the community. 

The Public Works Department, in conjunction with a Stormwater Drainage 

Advisory Board and numerous citizen groups, developed a phased

implementation program for projects identified in the City's basin drainage plans. 

The projects were funded in part by a combination of stormwater fees, sales tax 

revenues or bond issues. Construction of the improvements identified in the 

master planning project proceeded quickly based on the assured funding 

capability provided by the stormwater service fee. The City was also able to 

obtain more than $100 million of COE funding for various capital improvements 

to the stormwater systems. 

By the early 1990s, FEMA ranked Tulsa first in the nation for its floodplain 

management program, allowing Tulsans to enjoy the nation's lowest flood 

insurance rates. The program was also honored with FEMA's 1992 Outstanding 

Public Service Award; and the Association of State Floodplain Managers has 

twice given Tulsa its Local Award for Excellence. This represented a significant 

turn around in just eight years following the devastating flood of 1984. Since 

adoption of the FEMA community rating system, Tulsa has had one of the best 

ratings including a 2.0 rating in 2005. 

Today, Tulsa's floodplain and stormwater management program is based on 

respect for the natural systems. It is nationally regarded as a pacesetting 

program, and includes comprehensive watershed management, dedicated funds 

for maintenance and operation, a prototype flood alert system, and a $200 million 

capital improvements program. 

Tulsa's drainage systems have not been tested by a catastrophic rainfall since 

1986, but the system has handled less intense rainfall events well. City leaders 

believe improved maintenance, continuing capital projects, stringent regulations, 

and aggressive citizen awareness programs will reduce but cannot entirely 

eliminate future flood losses. 

A powerful testimony to the program is that, since comprehensive regulations 

were adopted in 1977, the city has no record of flood damages to any building 

that complies with those regulations. Implementation of the user-pays service 

fee funding is also given enormous credit by staff and elected officials because it 

enabled the City to elevate its capital investment and operational expenditures to 

a level that complements regulatory measures by resolving inadequacies in the 

systems that had existed for decades. 

 A-23 
Tulsa has instituted an aggressive floodplain program. The City’s long 

experience with flooding showed that the National Flood Insurance Program's 

minimum standard is insufficient for Tulsa. Therefore, the city's regulations 

exceed NFIP's standard in several important ways. The NFIP floodplain maps 

are based on existing development. However, unless plans and regulations are 

based on future watershed urbanization, new development may well flood as 

uphill urbanization increases runoff. Tulsa enforces the NFIP minimum 

regulations and maps to retain eligibility for federal flood insurance but, in 

addition, the City enforces its own more extensive maps and regulations. Those 

regulations are based on ultimate watershed urbanization as forecast in the 

City’s comprehensive plan. 

The Tulsa stormwater program is much more than flood control. The City is also 

building parks in the floodplains, sports fields in stormwater detention basins, and 

greenway trails on creek banks. It has forged strong partnerships with federal 

and state agencies. Tulsans now enjoy the lowest flood insurance rates in the 

country, and the community is reaping benefits from national awards and 

favorable publicity. Tulsa's progress has been called an example of what can 

happen when a community fully commits to solving urban stormwater problems. 

Organization and Staffing 

The City staff was reorganized following a City Charter change in 1989 that 

substituted the mayor/council for a government for the commission approach. A 

new Department of Public Works consolidated all public works services, including 

stormwater management, but the dedicated stormwater service fee funding was 

retained. Today, stormwater management is an accepted and integrated part of 

the city's services. 

Funding 

The City’s stormwater management program budget has ranged from $12 million 

to $14 million during the past three years. Current service fees are based on

impervious area and are set at $3.49/month per “equivalent service unit” (ESU). 

The ESU is defined as 2,650 square feet of impervious coverage, representative 

of the average condition on single-family residential properties. Service fee 

revenues total over $12 million. Where does the stormwater fee money go? 

 A-24 
Expenditures for the City’s FY 2

are shown in the pie chart to the 

left. As it shows, stormwater fees

are used primarily for maint

of stormwater detention facili

stream channels, pumping s

culverts, ditches and other 

drainage facilities. After sto

and when needed at other times,

crews remove material blocking 

stormwater flow in channels and 

detention sites. On average, the City crews clean more than 22 miles of ditche

and clear about 5 miles of drainage pipe each year. They remove tons of silt f

channels and reconstruct eroded earthen channels. 

002

enance

ties,

tations,

rms

s

rom

Inter-governmental Cooperation 

unities that surround it in their

ental

Public Participation 

the community in many of the major decisions as it 

se to 

nce the utility was formed and user fees were in place, the citizen advisory 

nued

r

OUISVILLE/JEFFERSON COUNTY (KY) METROPOLITAN 

Tulsa assists the suburban satellite comm

stormwater management efforts, but most of its attention to inter-governm

cooperation has involved federal agencies that offer funding for specific priorities

such as flood protection and hydrologic monitoring and analysis.

The City of Tulsa involved

formulated and implemented its stormwater utility program and associated 

funding mechanisms. A citizen advisory committee guided the initial respon

the devastating flood in May, 1984, which included assembling a consulting team 

to assist with utility feasibility analysis and implementation. 

O

group shifted its attention to the content of the program and, especially, the 

capital improvement planning to address flooding problems. They have conti

to be a major political force in support of the utility. The City also instituted a 

variety of community education and involvement initiatives aimed at improving

flood emergency awareness, water quality management, and utilization of wate

resources in the riparian corridors. 

 

L

SERVICE DISTRICT (MSD)

Keynotes

3⁄4 The Louisville approach involves a consolidation of flood control and 

stormwater management with a regional wastewater collection and 

 A-25 
treatment program provided by the Metropolitan Sewer District, or

Most of the smaller cities and towns in Jefferson County do not perform 

stormwater management function

MSD.

s.

es,

3⁄4

s area rate methodology;

a

 

le for approximately 29 miles of levees and 

large pump stations along the Ohio 

3⁄4 The ter and

sto

infr r

extens

ommunit e

Kentuc

1778 b d in

Jeffers overnor

of Virginia when the city was founded and la

became a major shipping center along the Ohio River, 

mong

3⁄4 The MSD was authorized by special state legislation in 1946, and 

established by Jefferson County and the City of Louisville. The MSD

service area is virtually county-wide. Its Board is appointed by the now 

consolidated Metro government council which directs the amalgamated 

County and City. 

3⁄4 MSD is funded principally by wastewater and stormwater service fe

which are independently structured, billed, and accounted for. 

Stormwater service fee attributes include: 

o an imperviou

o a flat rate charge for single-family residential properties; and, 

o differential rates for other properties based on an impervious are

equivalency unit. 

3⁄4 Key operational practices include: 

o watershed-based master planning throughout the County; 

o a consolidated NPDES permit administered by MSD; and 

o a broad range of functions that include a major flood control 

program responsib

protection works and fifteen

River. 

MSD has a staff of more than 600 that performs both wastew

water administrative, engineering, operational, regulatory, an

a

rm d

ast ucture improvement/management functions. The staff is 

ively cross-trained to obtain efficient operations. 

C y Profil

Louisville, 365 square miles and population 700,000, is the largest city in 

ky. It is located on the south shore of the Ohio River, and was founded in

y frontier explorer and military hero George Rogers Clark. It is locate

on County, which is named for Thomas Jefferson, who was the G

ter served as the third President of 

the United States. It soon

which reaches almost 1,000 miles into the Midwest of the United States. A

other noteworthy claims to fame, it is the home of the Louisville Slugger baseball

bat and hosts the Kentucky Derby, one of the premier annual horse races in the 

world. The county and city governments were recently consolidated into a 

“metro” government as provided for by state law. 

 A-26 
As a community located on a major river, Louisville has always been concerned 

about flood control and stormwater management. Repetitive major flooding 

incidents of low areas along the river led eventually to the construction of more 

than 20 miles of flood protection levees and large pump stations beginning

early 1900s. In the 1980’s local officials determined

in the

that effective management of 

oth the major flood control works and the smaller urban drainage systems 

ped

sustained at the 

entucky Court of Appeals level. MSD’s responsibilities have been expanded to 

y

oard of County Commissioners and City’s Board of Aldermen. 

ontrol and stormwater management to MSD 

ore the program and funding development and 

had

and second class had statutory authority to decline to be included, but 

ere were no second class cities in the County at that time (1986). A few of the 

d

b

required a consolidated program. The Louisville/Jefferson County Metropolitan 

Sewer District (MSD), then the regional wastewater service provider, was tap

to take over all stormwater management responsibilities. 

Following detailed studies, MSD adopted a dedicated stormwater service fee to 

fund a full range of stormwater management and flood control services and 

facilities. The MSD stormwater service fee is separate from the agency’s 

wastewater fee, though the staff is extensively cross-trained to efficiently perform 

both functions. The user fee has been tested in court and

K

include stormwater quality in recent years in response to federal NPDES 

requirements. 

Formation Process 

The MSD was formed by the City of Louisville and Jefferson County pursuant to

a state authorizing statute. Shifting the County’s and City’s flood control and 

stormwater management responsibilities to the MSD was accomplished b

actions of the B

The political decision to shift flood c

was essentially made bef

implementation work began, which enabled the process to be completed in just 

eight months. There was very little public participation in the formation process, 

though a concentrated effort to inform and educate the public about the new

service fees was initiated immediately prior to the first MSD stormwater service

fee billing. 

Jefferson County had more than ninety cities and towns when the stormwater 

management function was appended to the MSD wastewater program. Towns of

the fourth, fifth, and sixth class (per population as specified by state statutes)

no option whether or not to be included in the MSD stormwater program. Cities

of the third

th

third class cities declined to be included, and still are not. This created gaps an

inconsistencies in stormwater services across the County as MSD’s program 

grew. Those gaps still create some problems for both MSD and those cities. 

Service Area 

MSD’s stormwater service area is now approximately 280 square miles and 

encompasses nearly all of Jefferson County. It is similar to but not precisely the 

 A-27 
same as the wastewater collection and treatment service area. Substantial 

portions of the former City of Louisville have combined wastewater/stormwater

sewers. Outlying areas have separated sewers and many open drainage 

ks, ditches, roadside drainage).

t

nt

uisville

xtensive system of flood

protection levees and pump stations was constructed following the flood of 

ance of the flood protection works was originally a county 

s

Organization and Staffing 

istration and a substantial staff of over 600

er management functions in-house. 

Outside contracting is used to attain greater efficiency or when special expertise 

gineering and operational staffs are highly 

y

sed on

impervious area, and an equivalency unit of 2,500 square feet is used to 

on-residential charges to the single-family residential flat rate. Each 

ate

0.

components (cree

Role and Program 

MSD has two major program responsibilities, wastewater collection/treatmen

and stormwater management/flood control. Flood control is particularly importa

because Jefferson County is located on the Ohio River. Large areas of Lo

were historically flooded by the Ohio River, and an e

record in1937. Mainten

responsibility under U.S. Army Corps of Engineers oversight. That function wa

transferred to MSD along with stormwater management responsibilities. MSD 

also assumed responsibility for development-associated erosion and sediment 

control programs, though it does not have land use authority. 

Governance Structure 

MSD has a seven member Board of Directors, included a chairperson, appointed

by the Louisville/Jefferson County Mayor and Metro Council. The MSD Board 

guides policy and sets service fee rates. 

MSD has an appointed admin

management, engineering, operational, and support personnel. It has reduced 

staff count from more than 860 in 1995 in part by outsourcing some operations. 

MSD continues to perform many stormwat

or equipment is required. The en

cross-trained to perform both wastewater and stormwater services. 

Funding 

The wastewater and stormwater components of the MSD program are funded b

separate service fees that are independent and dedicated to each purpose in 

terms of rates, revenues, expenditures, and accounting. The current singlefamily residential stormwater service fee is $4.70/month. Rates are ba

normalize n

equivalent unit on developed non-residential properties is charged $4.70/month. 

Consistent with MSD’s wastewater rate practices, the stormwater service fee r

is adjusted annually to meet budget projections. Total stormwater service fee

revenues in Fiscal Year 2006 (July 2005) are expected to be nearly $26,700,00

 A-28 
Inter-governmental Cooperation 

Because MSD provides a centralized flood control/stormwater management 

program for nearly all of Louisville/Jefferson County, the need for intergovernment collaboration is low in compa

this guidance document. Coordination wi

rison to the other communities cited in

th the cities that opted out of the MSD 

those

has sought out public involvement in many aspects of its stormwater 

ce then. Infrastructure management, most notably 

repair programs, is administered by teams that work 

e

stormwater service area is sought, and MSD performs many planning, public

education, and other development review functions that are beneficial to

cities. 

Public Participation 

MSD’s stormwater program was initiated with little public participation, but the 

agency

services over the years sin

construction and remedial

closely with local elected officials and community groups to prioritize and 

undertake projects. Community relations are facilitated by a telephone hot lin

for service inquiries and complaints, and a designated staff is assigned to 

assuring effective response to customers. The staff maintains close contact with

elected officials as capital improvement and remedial repairs projects are

developed and undertaken. MSD also conducts numerous community 

involvement efforts associated with stormwater quality programs, and has 

developed brochures and other materials that are available throughout the 

community. 

SARASOTA COUNTY (FL) STORMWATER ENVIRONMENTAL

UTILITY 

Keynotes

3⁄4 The Sarasota County approach provides a strong, centralized stormwa

manageme

ter

nt planning, improvement and operations program conducted 

rge staff of more than 120 persons, with additional support for 

activities performed by about 50 employees of other County work 

3⁄4

service

dards applicable to assessments, 

which emphasize the apportionment of special benefit (that not available 

by a la

related

groups. The primary objectives of the Stormwater Environmental Utility 

are to reduce flooding, improve surface water quality, and attain 

responsible development practices. 

A Florida Supreme Court decision in 1996 determined that the Sarasota

County stormwater charge is a special assessment rather than a

fee. As such, it is subject to the stan

generally to all) and rational nexus rather than the reflecting the demand 

burden (cost of service) imposed by each person or property on the public

stormwater systems and programs. 

 A-29 
3⁄4

essional County Administrator. The 

Public Works Business Center includes the Stormwater Environmental 

al

3⁄4

unty and by inter-governmental agreement in the 

City of Sarasota. The assessments have three components that are 

e

3⁄4

reat latitude in determining the

functions of their county and the preferred method of funding. Sarasota 

y

also

3⁄4

arasota County and in

the City of Sarasota. Core funding policies include: 

r

o funding of customer service and administration, master planning, 

ds.

Key p

 

o watershed-based master planning has been conducted throughout 

and capital improvements are being 

made; 

permit; and

o a flood protection and response program is provided county-wide. 

Sarasota County is a charter county governed by a five-member Board of 

Commissioners and directed by a prof

Utility. There are four cities in Sarasota County. The city of Sarasota relies

on the County to improve its drainage system and perform most 

stormwater operations. The other three cities retain responsibility for loc

stormwater systems. 

The Sarasota County stormwater utility is funded by benefit assessments 

on properties in the Co

consistent across the service area, and one component (system 

capitalization) that is variable by watershed. The benefit assessments ar

billed on the County’s property tax bills. 

Under constitutional changes adopted in 1968, Florida counties may adopt 

charters that give local elected officials g

County has adopted such a charter. The Florida Statutes Chapters 125 

(County Government), 163 (Intergovernmental Programs), 197 (Tax 

Collections, Liens, and Sales ), and 403 (Environment Control) also

specifically enable both cities and counties to establish utilities and adopt

service fees and special assessments, or otherwise influence how the

organize for and fund stormwater management. The Florida Statutes

enable counties to use such other revenues as they determine to be 

appropriate, or guide their manner of doing so. 

Key policies adopted by the Board of Commissioners and practices 

instituted by the staff are applicable throughout S

o Capital investments will be funded by benefit assessments peculia

to each watershed; and 

and maintenance will be funded by benefit assessments that are 

the same for all watershe

o erational practices include: 

the County (26 watersheds),

o centralized stormwater quality management is performed by the 

County stormwater utility to ensure compliance with the local 

NPDES

 A-30 
3⁄4 Sar so

Enviro o allocates substantial portions of other 

em y

planning is contracted to private vendors. 

Comm

Saraso

approx rmed when Sarasota County 

The area was first homesteaded in the 

ent did not occur until the railroads arrived at the 

d of

lation

ds” flee the harsh winters of the Northeast and Midwest United 

tates for the balmy climate of Florida. There are three incorporated cities and 

an development and the problems associated with 

rainage in a low-lying coastal community. A Stormwater Environmental Utility 

urt

to

growth of

was consolidated into the

 In 1989 the Board of County 

ed the Stormwater Environmental Utility. An interated 

nty plus the city of Sarasota. The County is not responsible for 

areas lying within other incorporated municipalities in the County. 

a ta County has a large staff (120 +/-) within the Stormwater 

nmental Utility and als

plo ees’ time to stormwater management activities (50 +/-). Master 

unity Profile

ta County is located on the Gulf of Mexico on Florida’s West Coast 

imately sixty miles south of Tampa. It was fo

separated from Manatee County in 1921. 

1840’s, but true developm

beginning of 20th century. Citrus fruit growing, other agriculture, and tourism

were the basis of the economy for many years, and the County was the winter 

home of the famed Ringling Brothers circus for decades. The County has 

become a regional healthcare and commercial business center since the en

World War II. 

Sarasota County encompasses 620 square miles and has a resident popu

of 340,000. The population swells significantly during the winter months when 

many “snow bir

S

one town in the County. 

Stormwater management in Sarasota County was not a high priority before the

1980’s, when the County increased regulatory activities in response to the 

pressures of urban/suburb

d

was formed in 1989, and studies led to the adoption of a user fee. Sarasota 

County’s stormwater utility is perhaps best known for a Florida Supreme Co

decision in 1996, which found that the County was authorized by state statutes

establish the utility and enact a special assessment to support capital 

improvements and operational programs. 

Formation Process 

Sarasota County’s initial stormwater management program was an out

its Aquatic Plant Control Department, which

Transportation Department in 1981.

Commissioners establish

governmental agreement was signed with the City of Sarasota in 1991 and 

revised in 1997. 

Service Area 

The Sarasota County stormwater service area encompasses the unincorpor

portion of the Cou

 A-31 
Role and Program

itoring

associated with the NPDES permit. The Utility is also responsible for capital 

intenance of the stormwater systems in the 

nd

t

ed by

ing as a 

tor’s

organizational control. 

lity

nd it also financial supports a portion of the personnel 

expense associated with nearly 50 other County employees whose roles involve 

ater management. 

om a composite special

benefit unit assessment that has four components. The benefit assessment is 

calculation methodology that takes both pervious and impervious 

mployed

on

The Stormwater Environmental Utility is responsible for the County’s NPDES 

permit, and performs master planning for those portions of watersheds that lie 

wholly or partially in the County. However, it does not perform mon

improvements to and ma

unincorporated areas and within the city of Sarasota. County programs are 

limited to those facilities located in publicly-owned properties and rights-of-way

and those within dedicated easements. Systems located on private property a

not subject to easements are the responsibility of the property owners. The 

Utility is also responsible for regulation of the use, storage, and disposal of

sediments, herbicides, and other materials, and performs public relations, 

customer service, development review, and administration of the master accoun

files for benefit assessments. Street sweeping is done by the Road and Bridge 

Division (Public Works) using sweepers purchased by the Stormwater 

Environmental Utility. Water Quality monitoring and enforcement is perform

the County’s Environmental Services/Pollution Control Department. 

Governance Structure 

The Stormwater Environmental Utility is a separate account unit operat

division of the Public Works Business Center. It is governed by the five-member 

Board of County Commissioners and is within the County Administra

Organization and Staffing 

As a division of the Public Works Business Center, the Stormwater 

Environmental Utility interacts extensively with other County units. The Uti

staff numbers 120 (+/-), a

them in various aspects of stormw

Funding 

The Stormwater Environmental Utility budget in 2005 is approximately 

$20,000,000, with about $6,000,000 being for capital projects. Funding for the 

Stormwater Environmental Utility is derived primarily fr

based on a

areas on each property into account. An equivalency unit approach is e

that has several rate classifications for residential properties and individual 

charges for non-residential that reflects the hydrology of each property. The 

equivalency unit is referred to as the “Equivalent Stormwater Unit”, or ESU, and

represents an “effective impervious area” of 3,153 square feet. 

The ESU was determined by statistical analysis to be the average condition

single-family residences in the County, i.e. the total area and condition of an 

 A-32 
average single-family residence burdens the stormwater systems and programs 

in the manner attributable to 3,153 square feet of impervious coverage. The

ffective impervious area for non-residential properties is determined by applying 

d

ce. The

d is presently $3.20/year. The master planning and 

aintenance benefit unit assessments are uniform throughout the County, and 

t,

s

from

le properties in different watersheds may be 

ignificantly different. 

rmwater assessments are billed annually along with the 

ounty’s property taxes. Collection of delinquent billings is accomplished by a 

ntrol/emergency

ee other municipalities retain 

e

a formula that considers both impervious and pervious areas on each property 

and the conditions present in each case. For example, the pervious areas of 

citrus groves and orchards are treated differently than pervious areas in pasture 

or meadow because of the land management practices in the citrus groves an

orchards which alter the hydrology. “Urban pervious” surfaces, such as 

contoured mown lawns, have a much higher effective impervious value than 

other pervious conditions. 

Three benefit unit assessment components are uniform throughout the service 

area, customer service (administration), master planning, and maintenan

customer service benefit assessment is a fixed value for each account rather

than a charge per ESU, an

m

are based on the number of ESU on each property. The master planning 

assessment is currently $17.92/ESU/year, and the maintenance assessment is 

$59.33/ESU/year. On average, a medium size single-family residence is 

assessed $80.45 annually for these three components of the benefit assessmen

or approximately $6.70 per month. 

The capital infrastructure investment component of the benefit unit assessment i

reflective of the costs in each designated watershed, and currently varies

$12 to $141 per ESU per year across the County. The result is that the total 

assessment applicable to comparab

s

Credits are provided for in the County’s assessment methodology, primarily in 

relation to the capital improvement benefit assessments. Calculation of the 

credits is based on three factors, runoff quantity, runoff quality, and peak 

discharge rate. The sto

C

lien process similar to that applicable to property taxes. 

Inter-governmental Cooperation 

The Sarasota County stormwater program is closely coordinated with the cities’ 

programs in the area, especially in terms of NPDES permit compliance, master

planning and construction of major systems, and flood co

response. The city of Sarasota has contracted with the County to provide 

stormwater management services, but thr

responsibility for management of the local drainage systems in their 

communities. 

 A-33 
Public Participation 

Public participation is focused primarily on NPDES education/involvement 

g, flood and emergency awareness, and capital project 

onducts two public meetings during the master 

al

of

mandates, master plannin

construction. The Utility c

planning process (26 watersheds), and local meetings in areas where capit

projects are to be built. The staff also makes presentations at the request of 

neighborhood association, professional organizations, and special interest

groups. The County also responds to inquiries from the city council in the City

Sarasota. 

 A-34