Stormwater Management Utility Funding Options Considered

In November 2006, the Mayor and Council voted to develop a funding plan based on a new annual fee to support stormwater management (SWM) programs through a special SWM Utility.

 In short, the utility and fee have been proposed to meet costly federal requirements, provide and maintain storm drains, reduce existing stream erosion and pollution, and protect water resources through better municipal operations. The utility and fee would be similar to those in other communities in the area and across the country.

In this second article of a three-part series, the focus is on the new fee and the funding options that the City considered. The decision came down to either increasing property taxes and using general fund money, or implementing a SWM utility fee related to impervious surfaces (e.g., driveways, rooftops, parking lots) that result in storm water runoff from various types of property. Runoff carries pollutants into storm drains and then into streams and eventually the Chesapeake Bay. It also can cause erosion and flooding that damages streams and nearby homes and businesses.

Charging a tax is rarely done because it does not directly connect the tax amount to the burden a particular property places on the storm water system. In Rockville, charging a tax would place a heavier financial burden on residential properties than on commercial properties. About two-thirds of property tax revenue comes from residential property; the other third from commercial property.

The latest financial analysis shows that local taxes would have to be increased if the tax approach were selected. This would result in a projected first year tax increase of $0.0185 per $100 of assessed value, or $94 for a home with an assessed value of about $500,000. By the seventh year, the owner of that house would pay $255 in increased taxes. Properties such as government buildings, schools and churches do not pay property taxes, so the cost of the SWM Utility would be borne by only residential and commercial property owners.

The approach used by most communities with a SWM Utility is a user fee that is based on the amount of impervious surface on properties. Since a vast majority of residential properties in Rockville have roughly the same amount of impervious surface, single family houses would pay a flat fee, estimated to be about $56 in the first year of the program and increasing to about $89 a year in the sixth year.

Other properties, such as apartment complexes, offices and shopping centers usually have more impervious surface, which varies widely between these properties. The owners of these properties would pay a fee based on the actual amount of their impervious surface. The fee approach would result in commercial and institutional properties paying about two-thirds of the total SWM program cost. This is proportional to the amount of stormwater runoff they produce. 

The fee would be phased in over several years, allowing the program and staffing to build up gradually.