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2020 STORM WATER UTILITY FEE ANALYSIS DRAFT June 2020 ---PAGE BREAK--- STORM WATER UTILITY FEE ANALYSIS DRAFT PREPARED FOR: PREPARED BY: ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS i TABLE OF CONTENTS EXECUTIVE SUMMARY III Introduction How Much Revenue Is required for the Storm Water iv How Does a Storm Water Fee Work? iv What is the Recommended Fee and How Was It Calculated? v What is required to implement a Storm Water Fee? v CHAPTER 1 INTRODUCTION AND BACKGROUND 7 Introduction 7 Oversight and 8 Study Approach 8 Related Publications 9 CHAPTER 2 REVENUE REQUIREMENTS 10 Storm Water Program Costs 10 Administration 10 Operations 10 Debt 11 Capital Expenditures 11 Other Revenues 11 Other Expenditures 11 Funding of Operating Reserve 11 Storm Water Program Cost Summary 12 Storm Water fee 14 Revenue Needs to be met by User Fees 14 Approach to Collecting Needed Revenues 14 CHAPTER 3 RECOMMENDED FEE STRUCTURE 16 Fee Structure 16 Equivalent Residential Unit (ERU) 16 Customer Classes 17 Potential Credit Programs 19 Potential Hardship Program 21 Billing Mechanism 21 CHAPTER 4 RATE CALCULATION 22 Customer Base 22 Existing Customers 22 Growth 22 Effect of Potential Credits 22 Effective ERUs 23 Recommended Rate 24 Fee Comparison 26 Revenue Projections 28 CHAPTER 5 PUBLIC OUTREACH 29 CHAPTER 6 CONCLUSIONS 30 Recommended Fee 30 ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS ii Adoption/Implementation Process 30 Recommended Monitoring and Rate Study Updates 30 APPENDIX A CITY PROJECTED EXPENSE AND REVENUE TABLES 32 ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS iii EXECUTIVE SUMMARY INTRODUCTION Millcreek (the City) wants to create a storm water fee to create a reliable funding source to operate, maintain, and improve storm water facilities in the City. In support of this effort, Millcreek has retained Bowen Collins & Associates (BC&A) to perform a storm water fee analysis. A storm water fee (similar to a water fee or sewer fee) is a fee paid by customers to cover the cost of operating, maintaining, and improving a storm water system and running a regulation-mandated storm water program that focuses on water quality. Funding sources for the City’s storm water system are currently limited to general fund revenues that must be split between storm water and the many other City functions such (e.g. road repair/maintenance, parks, animal services, inspections, etc.). While some funds have been historically budgeted toward storm water, current funding for storm water is insufficient to maintain, operate, and improve the system, as well as comply with all necessary regulations. In recent years, most of the money spent on storm water facilities were emergency allocations that pulled funds from planned road improvement projects. Such emergency allocations became necessary due to sudden system failures. Such system failures underscore the need for proactive system improvement before failures occur and therefore, the need for a dedicated, consistent funding stream. Without one, it is expected (based on the experiences in Millcreek and elsewhere) that non-emergency storm water projects will continue to be underfunded or not be funded at all. Furthermore, Millcreek is filled with deteriorated storm water that needs replacement and has some areas in which storm water infrastructure is lacking. Also, the City has not yet been able to fully meet all MS41 Permit requirements due to lack of funding. Due to its recent incorporation, the Utah Department of Environmental Quality has fortunately given the City until 2022 to fully comply with the MS4 Permit requirements. This necessitates the City significantly increase the storm water budget to adequately fund capital improvements and meet MS4 Permit requirements associated with the City’s storm water program or face regulatory fines. To address these issues and to be proactive with respect to its storm water responsibilities, the City has decided to consider the implementation of a storm water user fee, which is a very common approach that is used by other cities in Utah to fund their storm water programs. In fact, the only entities in Salt Lake County that currently do not currently have a storm water user fee are Alta Town, Cottonwood Heights, South Salt Lake, the metro townships, and the unincorporated areas, and the only one of these not currently working on establishing a fee is Alta Town. Style Note: To enhance the readability of the Executive Summary, referenced figures have been included at the end of the summary instead of within the summary text. 1 MS4 stands for Municipal Separate Storm Sewer System; these are regulated by the USA Environmental Protection Agency (EPA). Millcreek’s storm water system is an MS4 and is thus regulated under a permit. To maintain MS4 permit compliance, Millcreek must create and follow a plan to adhere to storm water quality standards. Compliance includes public education and involvement, illicit discharge detection and elimination, construction site run-off control, long-term storm water management, and other pollution monitoring and prevention activities. ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS iv HOW MUCH REVENUE IS REQUIRED FOR THE STORM WATER PROGRAM? Using data provided by the City, BC&A projected the next 10 years of revenue required to sustainably fund the storm water program and determined a total revenue need of approximately $3.5 million per year (in 2020 dollars). See Table A-1 in Appendix A for a detailed budget breakdown. Figure E-1 shows the projected revenue requirement by budget category. The recommended approach to targeting revenue collection is increasing the fee each year by a small amount (approximately 2.3%) each year to account for inflation. This should allow the City’s new storm water utility to consistently meet funding needs without significant budget excess or shortfall in any given year. Figure E-1 also shows the projected annual revenue based on the recommended HOW DOES A STORM WATER FEE WORK? Just like any other utility user fee, a storm water user fee is calculated based on each customer’s cost of service and their impact to the City’s storm water management system. A customer’s impact to the City’s storm water management system is based on the amount of storm water runoff that a customer’s developed parcel contributes to the City’s storm water management system. The customer’s share of costs is proportional to his share of the total storm water runoff served by the City’s storm water facilities, which includes other customers’ runoff and runoff from public areas (such as public roads). Because it is impractical to directly measure the volume or rate of each customer’s contribution, storm water fees are instead based on the amount of impervious ground cover associated with each of property. Impervious ground cover includes all hard surfaces (like driveways, roofs, and sidewalks) that cause precipitation to be converted to storm water runoff and flow into storm water management facilities instead of infiltrating into the ground. Because most storm water runoff is produced by impervious ground cover or “impervious surface area” (ISA), its measurement is an acceptable substitute for measuring actual runoff and is the basis for a storm water fee. Each customer will be billed an amount that corresponds to the ISA on their property. For the convenience of both the customer and the City, the storm water fee is planned to be billed and included on one of the customer’s existing utility bills. To facilitate administering the storm water fee, it is recommended that the City’s customers be been grouped based on common ISA characteristics. These customer classes simplify billing while maintaining the requirement to equitably bill customers based on their relative share of system use. After a City evaluation of the ISA characteristics of properties within the City, there are five recommended customer classes. • Class 1: Single Family Residential with Lots 11,000 Square Feet or Under • Class 2: Single Family Residential with Lots Over 11,000 Square Feet • Class 3: Commercial / Institutional / Civic / Mixed Use • Class 4: Multi-Family Residential (Stacked housing / Condos / Apartments) • Class 5: Multi-Family Residential (Townhomes) Class 3 customers include commercial and industrial businesses, churches, government properties, mixed use development, etc. Because Customer Classes 1, 2, 4, and 5 have fairly consistent characteristics of ISA, customers in each of those classes will be charged a uniform fee respective to their class. However, Class 3 ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS v customers have a wide range of impervious area measurements so each customer in that class will be charged based on the property’s individual amount of ISA. The recommended approach to billing a storm water fee is the use of an Equivalent Residential Unit (ERU). An ERU is set such that 1 ERU worth of storm water system use is equivalent to 4,000 square feet of ISA. WHAT IS THE RECOMMENDED FEE AND HOW WAS IT CALCULATED? Millcreek staff and BC&A utilized Geographical Information Systems (GIS) data to analyze ISA in the City. From that analysis, the total number of ERUs in the City was determined. After making adjustments for customers that might qualify for fee reductions (by privately providing and funding exceptional measures or activities that benefit the storm water system or by being burdened by financial hardship), we estimated the total number of equivalent ERUs that would pay the full fee (the “Effective ERUs”). From there, the projected revenue requirements were divided among these Effective ERUs to establish the recommended fee of $9.81 per ERU per month in the 2020-2021 fiscal year. The ERU fee is recommended to increase each year to account for inflation. Table E-1 shows the recommended rate schedule for the storm water fee and the corresponding projected revenue from the fee for the next 5 years. Figure E-1 shows these same revenue projections against the identified storm water system revenue need. Table E-1 Recommended Storm Water Fee and Projected Revenue Fiscal Year Recommended Rate ($/ERU per month) Projected Revenue 2020-2021 $9.81 $3,476,000 2021-2022 $10.04 $3,574,000 2022-2023 $10.27 $3,674,000 2023-2024 $10.51 $3,777,000 2024-2025 $10.75 $3,884,000 WHAT IS REQUIRED TO IMPLEMENT A STORM WATER FEE? Jurisdiction over the establishment of a storm water utility and the implementation of a user fee lies with the City Council. The City Council would need to adopt the fee in order for the City to implement it. The timing of storm water fee implementation will be determined after negotiations with a third- party billing provider is finalized. ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS vi $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Emergency Expenses Unfunded Needs Public Works Yard Capital Expenditures Operations Administration Proposed Revenue Recommended revenue ramp-up Fee beginning at $9.81 per ERU General Fund Budgeted Expenses Note: Years listed are the beginning of the fiscal year (e.g. 2020 is the July 2020 - June 2021 fiscal year). Figure E-1 Storm Drain Historic and Projected Revenue and Expenses ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS 7 CHAPTER 1 INTRODUCTION AND BACKGROUND INTRODUCTION In 2020 Millcreek (the City) commissioned this study to identify a reliable, equitable, and defensible means to fund the City’s storm water program requirements. Historically, all funding for storm water services in the City have come from the general fund, which has a tax-based revenue source. The general fund cannot reliably fund regular activities to update the City’s aging infrastructure, perform routine maintenance on the system, update the system to current standards, and meet regulatory requirements associated with its storm drain system, as well as fund all of the other City functions (e.g. repair and maintain roads, etc.). The Millcreek Engineering Department has been tasked with evaluating and implementing measures, procedures, and policies necessary comply with regulatory requirements in their MS4 Permit and to provide means to properly manage and update the deficiencies in the City’s storm water management system. The engineers have indicated the City needs more resources for these purposes. For example, they identified specific needs for additional budget, staff, and equipment for street cleaning, maintaining facilities, inspecting facilities, and updating facilities that are required by their MS4 Permit. Additional resources are also needed to improve existing storm water management and operations. These needs require much more funding than has been provided by the general fund in the past. If the City does not make capital improvements to its stormwater system, existing infrastructure will fail, and emergency funding will continue to be needed to patch together system improvements and may not provide adequate flood protection to citizens and property. The City would likely face regulatory fines if it does not meet its MS4 permit requirements. To properly fund a storm water management program, the City has two principal options: 1. Taxes. The City may continue to utilize the general fund, which is funded by taxes. However, the City would need to allocate a much larger, consistent budgetary allowance than it has in the past to adequately fund the storm water program. Taxes also take money only from tax paying entities; there are many non-taxable entities that contribute to storm water runoff and do not provide funding to the City’s storm water system under a tax-based revenue source. 2. Storm Water Utility (and Fee). The second option is to establish a storm water utility. This utility would create a new enterprise fund that would be funded via a storm water user fee, which is a common approach among municipalities across the state and country. The storm water utility would include the organizational structure and equipment necessary to manage the City’s storm water program. The related user fee would be dedicated to storm water management activities and—as long as the user fee is set at the proper level—would guarantee a dedicated reliable storm water funding stream to ensure that the City can carry out the necessary repairs of failing infrastructure, upgrade the system, fund the needed regulatory requirements, and maintain and operate the system. Funding a storm water utility through a storm water fee is generally seen as advantageous over funding through taxes because a fee more fairly distributes costs among different user groups and better promotes adequate funding for storm water services. To provide technical and procedural assistance in addressing this issue, the City retained the services of Bowen Collins & Associates (BC&A) to support the City team in its analysis and to complete the related user fee rate study. The primary purpose of this report is to document the rate study and provide recommendations regarding the potential establishment of a Storm Water Utility in Millcreek. ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS 8 OVERSIGHT AND COORDINATION As with any public project, especially one that might result in a new user fee to residents, it was important that this study be conducted with a significant amount of coordination and input from the public, policy makers, technical personnel, and administrative staff. Stakeholder outreach is also important to provide oversight to the study to make it responsive to the realities and needs of the City and its residents and property owners. Chapter 5 contains a description of the outreach efforts that were performed to inform the public and stakeholders about the proposed plan to create a new storm water utility and user fee and to request comments and input regarding that proposal. STUDY APPROACH The scope of this study includes answering three principal questions: • What user fee rate is appropriate for the City, how should it be charged, and how often should it increase? • How should the fee be structured to be equitable, defensible, and efficiently administered? • How can the study results and recommendations be clearly communicated to the public and policy makers? To adequately address these questions, the study used the following general approach. 1. City staff identified revenue requirements for now and the future. BC&A developed an overall funding plan by researching historic storm water related expenditures and projecting existing and future funding needs. a. This step produced a 10-year revenue requirement projection for the storm water management program, which will be recoverable by the recommended fee. Revenue requirements are discussed in detail in Chapter 2. 2. BC&A and City staff evaluated the City’s storm water service area to determine the characteristics of the customer base that would be subject to the fee and customized the fee structure to that customer base. a. Because storm water related services are unmetered, a different approach is required to tie system use to the required fee. In the case of storm water services, the impervious land cover area, aka “Impervious Surface Area” (ISA), is a widely-used and acceptable proportional representation of storm water system use. Therefore, this step included an evaluation of the impervious land cover within the City service boundary and defined customers by impervious land cover characteristics. b. The analysis of the customer base, including distribution of impervious area, was completed by City Staff using their GIS database, analytical GIS tools, and high definition aerial imagery from recent years. c. City staff performed an analysis to determine the amount of ISA contained on an average developed residential lot in the City. That amount of impervious surface area was defined to be an equivalent residential unit (ERU) for the purposes of this study. ISA is defined, and the related analyses explained, in Chapter 3. d. The total number of ERUs in the service area was calculated by BC&A using GIS programs and data provided by the City. ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS 9 3. The recommended fee was calculated by distributing the projected revenue requirements over the projected customer base. a. This step accounted for 10-year projections of both customer base and revenue requirements. It also considered the credits that may be offered for exceeding certain storm water program requirements. Rate calculations are discussed in detail in Chapter 4. 4. Study results, including the recommend rates and fee structure, were presented to policy makers and the public for consideration. a. The public was made aware of the rate study and potential fee via videos posted to the City’s website and letters sent by the City. The videos and letter allowed the public to have time to consider the fee and present questions/comments to the City about the fee. b. Public outreach included a presentation of the recommended rate at a public open house which was conducted in person (and online due to the ongoing COVID-19 pandemic). Comments were allowed from the public via email or in-person during and immediately following the open house. The public was made aware of the open house via the City’s website and social media prior to the open house. c. The recommended rate and policy structure were presented to City Council. Comments from the City Council were addressed in the rate study and policy manual. d. Public outreach is discussed in detail in Chapter 5. It should be noted that this study report is a working document. If revenue needs or other underlying assumptions vary significantly from those documented in this report, the recommendations may need to be revised. Any technical questions related to this document may be fielded to Justin Dietrich, P.E., or Craig Bagley, P.E., at Bowen, Collins, and Associates. RELATED PUBLICATIONS While this report focuses on the study which underlies recommendations related to user fees, it does not contain all necessary information to dictate how the fees are established and how the storm water program will be operated. A more complete understanding of the Storm Water Utility is addressed in the following separate documents: • Storm Water Utility Policy Manual. This document explains the proposed policies and procedures for the administration of the storm water fees. This manual is publicly available on the City’s website. • Storm Water Utility Ordinances. Official legal adoption of the fee will be authorized by the City Council upon creation of the Storm Water Utility via ordinance. The Fee will be published as part of the consolidated rate schedule. Draft ordinances are available via the usual channels and official, adopted ordinances will be added to the City Code. ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS 10 CHAPTER 2 REVENUE REQUIREMENTS The revenue needed to fund the City’s storm water program is defined by the costs of: meeting government-mandated storm water management activities defined in Millcreek’s MS4 Permit; completing capital improvements in the City’s stormwater system; and properly operating and maintaining the City’s existing storm water facilities. This chapter defines the storm water program revenue requirements. STORM WATER PROGRAM COSTS The revenue needed to fund the City’s storm water program requirements consists of the current and medium-term projected costs that will be incurred by the new utility to satisfy the need for capital improvements, operations and maintenance, and regulatory requirements. These costs (the revenue requirement) define how much revenue must be collected by the user fee (or by other means) in order to adequately fund the storm water program. Some expenses associated with equipment, personnel, maintenance, and capital projects have historically been funded by the general fund in a variety of budget categories. However, many of the required storm water program elements have been unfunded in the past or are newly identified. To establish the overall revenue requirement, the Millcreek Engineering Department proposed a detailed budget based on past storm water program activities and budgets and on the new activities needed to update existing storm water infrastructure, comply with MS4 requirements, and complete necessary operations. For the purposes of this study text, the budget needs were separated into the following four categories. • Administration • Operations • Debt • Capital Expenditures Each of these categories and the analysis of costs related to each is described below. A detailed line- item budget to meet storm water program requirements for each category is included in Appendix A. Administration Administration expenses, which include management, engineering, inspection, and billing, are the annual costs to employ the staff needed to fulfill administrative tasks related to the storm water system. This category is shown in Figure 2-1 (below) as “Administration”. Operations Operating expenses, including billing and maintenance, are the annual costs of operating and maintaining the storm water system. They include items such as salaries and benefits for related staff, equipment, and supplies for infrastructure repair, cleaning catch basins, street sweeping, etc. Projected operation expenses in this study include two components: • The first component is baseline Operations and Maintenance (O&M) costs based on historic baseline O&M expenses plus new O&M requirements. Baseline O&M costs are relatively constant from year to year and are expected to follow the rate of inflation and overall system expansion as the number of facilities increases with growth. ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS 11 • The second component is large equipment purchases needed for maintenance and to meet water quality requirements. Within the next few years, these include a vactor truck and a street sweeper. These components are shown in Figure 2-1 (below) as “Operations”. Debt The City does not currently have any debt but is planning to take out a bond in the 2020 fiscal year to buy maintenance equipment. Debt will include the annual payments on the bond. This category is shown in Figure 2-1 (below) as “Debt”. Capital Expenditures Capital expenditures are the costs of constructing and improving storm water management facilities within the City service area. This can include the construction of new facilities or the replacement of existing, deteriorating facilities. Capital improvement expenditures are usually the most volatile expense category. Because the above categories have comparatively little room for adjustment, budgets are usually balanced by increasing or decreasing capital improvement expenditures. While this type of fluctuation is typical and acceptable, the overall health of the system is highly dependent upon adequate, consistent funding of this portion of the budget. The City is in a unique situation with respect to infrastructure needs because of the age of its storm water infrastructure. Most of the City’s storm water infrastructure was constructed before 1980, which was well before Millcreek became a city. Most of the City’s storm water facilities (principally corrugated metal pipe) have exceeded their design life and are significantly corroded. As a result, the revenue needs for capital expenditures used in this analysis contribute more than any other category. This category is shown in Figure 2-1 (below) as “Capital Expenditures”. The revenue requirement shown is based on the City’s current storm drain master plan and is the average annual cost of all projects identified for completion within the next 10 years. Other Revenues This study assumes no other revenue (other than the fee) to be available to the storm water program. In other words, the limited amount of general funds previously allocated for storm water facilities and management will no longer be budgeted for storm water and no other revenue sources (such as impact fees) will be made available. Millcreek has no impact fees for storm water due to the small amount of growth expected to occur in the future. There is no need for an impact fee. Other Expenditures Historically, only a small amount of revenue requirements were specifically allocated to perform federally mandated activities identified in Millcreek’s MS4 permit. It was assumed that most MS4 requirements will be met through maintenance activities, participating in the Salt Lake County Stormwater Coalition, performing capital improvements, and improving its administration and operations. It should be noted the EPA has discussed changes to standards and requirements for MS4 systems that could lead to the need for additional funds to meet MS4 requirements in the future. Funding of Operating Reserve To be self-sustaining, all utilities should maintain a reserve fund account to ensure continuation of operations in the case of sudden revenue interruption or emergency capital expenditure. However, because the City is in dire need of capital improvements, funding of the operating reserve will be postponed and phased in in future years after the most critical capital improvements have been addressed. ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS 12 Storm Water Program Cost Summary The revenue requirements described above are the City’s total cost of adequately funding its storm water program. Because any implemented storm water fee is intended to meet future as well as current needs, it is important to project these costs into the future. By utilizing input from City staff on the timing of one-time expenses and by accounting for inflation and estimated system growth, the expected budget for each cost category has been projected thru the 2029 fiscal year. These projections are shown by component and year in Figure 2-1. ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS 13 $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Emergency Expenses Unfunded Needs Public Works Yard Capital Expenditures Operations Administration Note: Years listed are the beginning of the fiscal year (e.g. 2020 is the July 2020 - June 2021 fiscal year). Figure 2-1 Storm Drain Historic and Projected Expenses ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS 14 STORM WATER FEE REVENUE Revenue Needs to be met by User Fees Before calculating recommended storm water user fees, it is important to compare projected costs to expected non-fee revenues and ultimately decide how much of the program costs are to be recovered by the storm water user fee. In the case of the City, there are virtually no other revenue sources besides taxes from which the storm water system can be funded. Therefore, based on feedback from the City, it was determined the storm water user fees should be calculated to fully fund the storm water system management and maintenance costs. Approach to Collecting Needed Revenues It is important to select a funding approach that will collect the target revenues. Based on the identified revenue requirements and feedback from City staff, the following approach to revenue collection has been selected: • Establish fees that adjust annually to match revenue requirements. This approach to setting rates would be to collect annual revenues that exactly meet that year’s expenses. However, administering a fee to do this is neither practical nor possible for various reasons. Instead of increasing the fee year-to-year to exactly match up revenue requirements, a best- fit line is used to estimate a constant fee growth rate over a 10-year period. To administer this type of fee, either a predefined fee schedule (with annual adjustments) would need to be adopted initially, or the fee would need to be tied to an appropriate price index. The typical advantage of this type of rate implementation option is it most closely matches the rates charged to the revenue needed in any given year and it ensures the purchasing power of the fees is not overrun by inflation in future years. Under this approach, it is recommended that yearly fee adjustments are planned and documented in advance. Doing so has the administrative and political advantage of avoiding politically difficult fee jumps and of being tied to potential revenue deficits should a fee increase be postponed. Figure 2-2 shows the results of using this approach to fund storm water services. ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS 15 $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Emergency Expenses Unfunded Needs Public Works Yard Capital Expenditures Operations Administration Proposed Revenue Recommended revenue ramp-up General Fund Budgeted Expenses Note: Years listed are the beginning of the fiscal year (e.g. 2020 is the July 2020 - June 2021 fiscal year). Figure 2-2 Storm Drain Historic and Projected Revenue and Expenses ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS 16 CHAPTER 3 RECOMMENDED FEE STRUCTURE Besides generating sufficient revenue to operate the storm water system, the other major goal for the storm water user fee is to be equitable, defensible, and able to be efficiently administered. To meet this goal, the fee structure should equitably distribute program costs among system customers in relative proportion to their level of use. However, proportional use for a storm water system is not as straight forward as it might be for other utilities. Unlike water or electricity systems, flow into storm water systems is not metered and rarely do all customers have a discrete point of connection. Therefore, the industry standard for storm water systems is to consider the amount of impervious surface area (ISA) associated with each customer as an estimate of the storm water generated by that customer. Impervious surface areas are those areas covered with low- or non-porous surfaces, through which precipitation cannot directly and readily infiltrate into the ground. The reason that ISA is considered a good proxy measurement for the volume and/or rate of storm water runoff that enters and is managed by the storm water system is because the overwhelming majority of runoff (especially from urban areas) runs off of impervious surfaces, whereas a significant amount of precipitation that falls onto pervious surfaces tends to infiltrate into the ground and does not generally place a direct demand on storm water facilities. In other words, developed properties that have large amounts of impervious area are very likely to contribute much more storm water runoff, pollution, and debris into the storm water system than similarly sized properties that have a lesser amount of impervious area. This study included an analysis of the City’s GIS data and high-resolution aerial imagery that allowed us to understand the inventory of impervious surfaces in the City. The results of that analysis helped to categorize the customer base and provide a basis upon which storm water system costs can be equitably distributed among customers. This is known as a volumetric approach to setting user fees because it is based on the relative share of volume contributed to the system by the customer and it approximates the real cost of serving that customer. Using this method as the basis of developing a user fee is equitable and defensible and is the method upon which most storm water user fees are based. FEE STRUCTURE In accordance with the industry standard, other storm water fees in effect along the Wasatch Front, and the characteristics of Millcreek, it is recommended that the adopted user fee structure: • Be billed based on an Equivalent Residential Unit (ERU) that is tied to impervious area • Have five separate customer classes • Consider including credits to enhance equity in revenue assessment Each of these elements of the fee structure are described in this section. Equivalent Residential Unit (ERU) The standard billing unit that should be used for assessing the storm water user fees is the Equivalent Residential Unit (ERU). Every ERU will be billed at the same rate. For example, if the user fee were set at $15 per ERU per month, a customer assessed 1 ERU would pay $15 per month, a customer assessed 2 ERUs would pay $30 per month, and so on. ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS 17 An ERU is intended to be representative of the amount of impact that an average single-family residence has on the City’s storm water system and is used as the basis to assign proportional storm water program costs to each customer. For the purposes of this study, an ERU is defined as the average amount of impervious area for an average single-family residence within the City. City staff used their GIS database to compute impervious areas associated with approximately 120 developed single-family residential parcels. This analysis resulted in an average impervious area of approximately 4,000 square feet for a single-family residential lot. Based on these calculations, for the purposes of this study it is recommended than an ERU be defined as 4,000 square feet of impervious surface area (ISA). An ERU definition of this size is similar to those used to develop storm water user fees in neighboring Cities. Customer Classes It is impractical to charge every residential customer a custom fee based on the actual amount of impervious area on each lot. Doing so would greatly increase the expense and unnecessarily complicate the administration of the storm water program. The use of impervious area as an approximate measure of storm water system impact and its use is just that—an approximation. There is no justification to track the small differences in impervious area of every customer. Therefore, this study has analyzed the City’s customer base and grouped customers according to impervious area characteristics. Based on this analysis, it is recommended the City establish five customer classes if a new storm water user fee is established. The five recommended customer classes are described below. Each customer type shares similar characteristics of impervious area and would be billed in a manner consistent with those characteristics. In the example photographs shown, areas highlighted in red constitute impervious surface area (ISA) and areas highlighted in blue constitute pervious areas. Class 1: Single Family Residential with Lots 11,000 Square Feet or Under. This class of customer has a single residential structure designed for a single family. The City used their GIS system and physical mapping to find the impervious area of 120 different single family residential lots. In doing so, data showed that the average residential lot size in Millcreek’s District 4 is significantly larger than in other parts of the Millcreek. The increase in lot size also correlates to an increase in impervious area. In order to avoid unfairly overcharging lots with less impervious area, ERUs for lots with total areas under 11,000 square feet and over 11,000 square feet were calculated separately. The impervious area analyses performed for lots under 11,000 square feet indicated that Class 1 customers have 88 percent of the impervious area associated with an ERU (4,000 square feet). Thus, it is recommended the user fee for Class 1 customers be 0.9 ERUs per lot (all ERU calculations are rounded to the nearest tenth). Customer Class 1 or 2 Example ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS 18 Class 2: Single Family Residential with Lots Over 11,000 Square Feet. This class of customer has a single residential structure designed for a single family. See Class 1: Single Family Residential with Lots 11,000 Square Feet or Under (above) for more information. The impervious area analyses performed for lots over 11,000 square feet indicated that Class 2 customers have about 156 percent of the impervious area of the average single-family residence (the average includes lots under 11,000 square feet and lots over 11,000 square feet). Thus, it is recommended the user fee for Class 1 customers be 1.6 ERUs per lot. Class 3: Commercial / Institutional / Civic / Mixed Use. This class of customer includes all non-residential types of properties such as commercial and industrial businesses, government properties, churches, schools, mixed use development, factories, parks, etc. These properties vary significantly in size and in the amount of associated impervious surface area. Because of the great variation seen within this customer class, the user fee for each Class 3 customer will be based on an individual analysis of impervious area, from which the number of ERUs to be billed will be determined. The conversion from impervious area to ERUs (along with an example), is as follows. Class 4 Formula: 𝑃𝑟𝑜𝑝𝑒𝑟𝑡𝑦 𝑆𝐹 𝐼𝑚𝑝 𝐴𝑟𝑒𝑎 4,000 𝑆𝐹 𝐼𝑚𝑝 𝐴𝑟𝑒𝑎 𝑝𝑒𝑟 𝐸𝑅𝑈= 𝐶𝑢𝑠𝑡𝑜𝑚𝑒𝑟 𝐸𝑅𝑈𝑠 Class 4 Example Calculation: 139,010 𝑆𝐹 𝐼𝑚𝑝 𝐴𝑟𝑒𝑎 4,000 𝑆𝐹 𝐼𝑚𝑝 𝐴𝑟𝑒𝑎 𝑝𝑒𝑟 𝐸𝑅𝑈= 34.8 𝐸𝑅𝑈𝑠 Notes Imp = “Impervious” Formula results should be rounded to the nearest tenth of an ERU to facilitate consistent administration. Class 3 Example – William Penn Elementary 139,010 Square Feet of ISA, 34.8 ERUs Class 3 Example – Church at 4366 1500 E 138,537 Square Feet of ISA, 34.6 ERUs ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS 19 Class 4: Multi-Family Residential (Stacked Housing / Condominiums / Apartments). This class of customer is associated with residential dwellings that are contiguous with other dwellings but where single family dwellings are stacked on multiple stories or levels. In Millcreek, the main type of dwelling in this class is the apartment. Millcreek staff used their GIS system and physical mapping to calculate the impervious area of 12 different apartments and divided by the number of units at that complex. The analysis results show that Class 4 customers have less impervious area than typical Class 1, 2, and 5 customers and thus have a smaller impact on the storm water system and program costs (on a per customer basis). The impervious area analyses performed for apartments indicated that Class 4 customers have just over 35 percent of the impervious area of the average 4000 square foot single family residence. Thus, it is recommended the user fee for Class 4 customers be 0.4 ERUs per dwelling. Class 5: Multi-Family Residential (Townhomes). This class of customer is associated with residential dwellings that generally connect to adjoining units but where a single family would occupy an area represented by a 2-dimensional footprint, not stacked above or below each other on multiple levels. The dwellings are separate pieces of real property. In Millcreek, the main type of dwelling in this class is a townhome, but dwellings like duplexes are also included. Millcreek staff used their GIS system and physical mapping to find the impervious area of 7 different townhome neighborhoods and divided by the number of units in that neighborhood. The impervious area analyses performed for townhomes indicated that most Class 5 customers have just under 85 percent of the impervious area of the average 4,000 square foot single family residence. Thus, it is recommended the user fee for Class 5 customers be 0.8 ERUs per dwelling. Potential Credit Programs While the use of impervious surface area (ISA), ERUs, and customer classes as described above is sufficient to produce an equitable, defensible, and easily administered fee in the vast majority of cases, there may be reason to include credits in the fee structure for some customers. Credits may be considered when customers privately own and maintain infrastructure that lessens their impact on the City system or otherwise assists the City fulfill its mandate for stormwater. Most often, credits are available only to non-residential customers. However, in rare cases, residential customers could also qualify for a credit if a homeowner’s association operates and maintains a qualifying neighborhood storm water management facility that reduces impacts to the City’s storm water facilities. A potential credit program was discussed with city staff. The advantages of credit programs include but are not limited to: the enlistment of customers to help the City meet storm water goals; assistance from customers in meeting MS4 requirements; and customers that have constructed private facilities that significantly reduce impacts to City storm water facilities. On the flip side, credits require additional layers of administration to process applications, monitor activities, and bill credits correctly. Class 4 Customer Class Example ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS 20 After coordinating with Millcreek staff, a short list of example potential credits that may be considered is included below. Official determination of credits to be included, along with the size of credit offered and the attached requirements, are determined by the City Council and defined in the Storm Water Program Policy Manual. • Retention Credit. This credit could be offered to customers that retain storm water discharges from their own property and are solely responsible for operation and maintenance of those retention facilities. This type of storm water best management practice (BMP) has the potential to reduce the cost of operating the City system by limiting the size and type of municipal storm water management facilities. • Detention Credit. This credit could be offered to customers that own and operate storm water management facilities that attenuate peak runoff discharges to release rates that are less than those required by the City’s storm water master plan. This type of storm water BMP has the potential to reduce the cost of operating the City system by limiting the size and type municipal storm water management facilities. • Water Resource Training Credit. This credit would be available to institutions and businesses that conduct and teach an approved water resource training curriculum or program for facilities and similar personnel. This activity has the potential to reduce the cost of operating the City program by offsetting some of the public outreach requirements of the MS4 Permit and encouraging institutions and businesses to practice safe storm water practices. If the City chooses to include any fee credits as a feature of their storm water program, it is recommended that the following be considered. 1. Credits should be typically offered only to Class 3 customers. The reason for this is that residential customer fees are low. Handling the credit applications and keeping track of credits that shave off mere cents per month would create an excessive administrative burden. In some cases, where an HOA or an apartment complex manager (or similar entity) applies for a credit on behalf of the residents within the HOA or apartment complex, a credit could be offered to those residential customers (Classes 1, 2, 4, and 2. Every credit that is granted should be accompanied by an executed agreement between Millcreek and the customer that requires the customer to properly maintain the related private infrastructure and carry out other credit requirements associated with Millcreek’s MS4 Permit. The reason for this is that it would define and formalize maintenance requirements and activities that are required for the customer receiving the credit. The City’s system receives no benefit from infrastructure that is not maintained to function properly. 3. The City should allow customers to apply for multiple credits if they qualify. However, the City should include in its policy a maximum allowable credit to a customer’s storm water fee and retention and detention credits cannot be received at the same time for the same property. The reason is retention and detention credits should not be allowed to be combined. If a customer is detaining, by default they will not be retaining. If a customer is retaining, by default they will be detaining and that should be taken into consideration when choosing a retention credit. 4. Credits should only be tied to activities that exceed minimum storm water management requirements defined by City Standards and their MS4 Permit and have a meaningful, beneficial impact on the physical system or on the administrative and regulatory components of the program. Credits should not be given to trivial or minor efforts with little to no meaningful impacts. ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS 21 5. Credits should be given only to areas actually served by the qualifying private facilities (typically a detention or retention basin). For example, if a large customer has 48,000 square feet of ISA (12.0 ERUs), but only half of the ISA is served by the customer’s retention basin, only half of the ERUs (6.0 ERUs) should be discounted by the credit. Potential Hardship Program While use of impervious area, ERUs, and customer classes as described above is sufficient to produce an equitable, defensible, and easily administered fee in the vast majority of cases, there may be reason to include a hardship waiver for residential customers who are unable to pay the storm water fee. The hardship waiver could be up toa 100 percent credit on a customer’s storm water fee. For example, if a residential (Class 1, 2, 4, or 5) customer qualifies for a hardship credit, they then pay $0 instead of their normal fee. Qualification for the hardship credit may include: • Active duty military • Low-income households • Other hardships as determined by the City The Storm Water Policy Manual defines application procedures, duration of credit qualification, and other administrative particulars for the hardship program. Billing Mechanism Since Millcreek has no current enterprise funds and does currently send bills out for municipal services, it was assumed that a third-party billing service will mail storm water fee bills to customers. The City will be responsible for providing the billing provider with a comprehensive list of addresses and corresponding fees. Additional details regarding billing policies and procedures are documented in the Storm Water Policy Manual. ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS 22 CHAPTER 4 RATE CALCULATION With an understanding of the storm water program revenue needs (Chapter 2) and the recommended rate structure (Chapter the next step in the rate calculation process is to divide system revenue requirements over the customer base after considering growth and the consequences of potential credits. That process is described below. CUSTOMER BASE Because the storm water utility fee billing is based on an ERU, the customer base is the total number of ERUs that pay into the utility. Existing Customers Using the Millcreek’s extensive GIS database, which includes parcels organized by occupancy type and impervious area mapping, it was possible to estimate the total number of ERUs in the City. This was done by consolidating each City parcel into one of the five customer classes described in Chapter 3. For each Class 1, Class 2, Class 4, and Class 5 dwelling, the appropriate number of ERUs (0.9 ERUs per dwelling, 1.6 ERUs per dwelling, 0.4 ERUs per dwelling, and 0.8 ERUs per dwelling, respectively) were assigned and totaled. For all apartments, a vacancy rate of 10 percent was assumed based on suggestions from City staff. For all parcels represented by the Class 3 customer class, the aggregate amount of impervious area was calculated and converted to total Class 3 ERUs using the definition of an ERU and the calculation shown above in Chapter 3. The total calculated ERU’s by customer class is summarized in Table 4-1. Table 4-1 Existing Millcreek Customer Class Summary Customer Class ERUs Percent of Total Class 1: Single Family Residential with Lots 11,000 Square Feet or Under 8,777 28.5% Class 2: Single Family Residential with Lots Over 11,000 Square Feet 6,926 22.5% Class 3: Commercial / Institutional / Civic / Mixed Use 10,067 32.6% Class 4: Multi-Family Residential (Stacked Housing / Condos / Apartments) 3,439 11.2% Class 5: Multi-Family Residential (Townhomes) 1,599 5.2% Total 30,808 100% Growth Just as it is important to project revenue requirements into the future, a key aspect of calculating a sustainable fee is to project changes in customer base into the future. The assumed annual growth rate in ERUs for the next several years was 0.5 percent. That growth rate is understandably small since most of the City has already been built out. Effect of Potential Credits As described in Chapter 3, the City has the option to offer credits as part of its storm water fee structure. If offered, these credits would reduce the revenue collected from credited customers below the full per ERU value that would otherwise have been collected. For example, if the established fee ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS 23 were $10 per ERU and a Class 3 customer that owned a parcel with 20 ERUs of impervious surface implemented improvements to earn a 10% credit, the City would only collect $180 from the customer instead of $200 [20 ERUs × $10 per ERU × (100% - 10% credit) = $180]. Therefore, offering fee credits in effect reduces the number total “Effective ERUs” in the customer base, which is the equivalent number of ERUs from which the City expects to collect the full fee. Effective ERUs To estimate the effective ERUs in the system, the following conservative assumptions have been made. These assumptions have been reviewed with City staff to ensure they are reasonable with respect to their knowledge of the existing system and trends within the City. • The detention credit value would be a 15% reduction, the retention credit value would be a 40% reduction, and the training credit value would be a 10% reduction. • Approximately 25 percent of existing Class 3 ERUs are already, or would choose to become, eligible for and apply for a detention credit. • Approximately 5 percent of existing Class 3 ERUs are already, or would choose to become, eligible for and apply for a retention credit. • Approximately 15 percent of existing Class 3 ERUs would choose to become, eligible for and apply for a training credit. • Approximately 2 percent of single-family residences and 5 percent of multi-family residences would be eligible and choose to apply for the hardship waiver. After applying these assumed participation rates and the corresponding revenue reduction due to potential credits, the number of effective ERUs in the system were calculated. Table 4-2 summarizes the estimated post-credit effective ERUs by customer class. ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS 24 Table 4-2 Estimated Post-Credit Customer Base for Millcreek Customer Class ERUs Effective ERUs Percent of Total Effective Class 1: Single Family Residential with Lots 11,000 SF or Under 8,777 8,601 29.2% Class 2: Single Family Residential with Lots Over 11,000 SF 6,926 6,788 23.0% Class 3: Commercial / Institutional / Civic / Mixed Use 10,067 9,337 31.6% Class 4: Multi-Family Residential (Stacked Housing / Condos / Apartments) 3,439 3,267 11.1% Class 5: Multi-Family Residential (Townhomes) 1,599 1,519 5.1% Total 30,808 29,513 100% As shown in Table 4-2, the overall effect of credits and hardship waivers on the customer base (under the assumptions listed above) is small (less than 5 percent) but not insignificant. This means that the overall effect of potential credits on the recommended fee is similarly small (although it can have a much more significant effect on customers from an individual perspective). In other words, the decision related to offering both credits and a hardship waiver will affect the recommended fee per ERU by less than 55¢ per month. RECOMMENDED RATE The calculated fee that will meet the revenue requirements outlined in Chapter 2 and adhere to the fee structure outlined in Chapter 3 is $9.81 per ERU per month based on the customer base (the Effective ERUs) described above in Chapter 4. Figure 4-1 shows the projected revenue from that fee (with annual increases for inflation) along with the projected storm water system maintenance and management costs. Table 4-3 shows the 2020-2021 fiscal year billing schedule based on the recommended rate of $9.81 per ERU. Table 4-3 Recommended 2020-2021 Billing by Customer Class Customer Class ERU per Customer 2020-2021 Bill per month* Class 1: Single Family Residential with Lots 11,000 SF or Under 0.9 $8.83 Class 2: Single Family Residential with Lots Over 11,000 SF 1.6 $15.70 Class 3: Commercial / Institutional / Civic / Mixed Use Custom Calculation Custom Calculation Class 4: Multi-Family Residential (Stacked Housing / Condos / Apartments) 0.4 $3.92 Class 5: Multi-Family Residential (Townhomes) 0.8 $7.85 *2020-2021 billing is based on the recommended rate of $9.81 per ERU ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS 25 $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Emergency Expenses Unfunded Needs Public Works Yard Capital Expenditures Operations Administration Proposed Revenue Recommended revenue ramp-up Fee beginning at $9.81 per ERU General Fund Budgeted Expenses Note: Years listed are the beginning of the fiscal year (e.g. 2020 is the July 2020 - June 2021 fiscal Figure 4-1 Storm Drain Historic and Projected Revenue and Expenses ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS 26 Based on the information shown in Figure 4-1, the conclusion can be made that within this planning window, the storm water fee increasing at 2.3% each year is sufficient to accommodate for projected increases in storm water maintenance and management costs and inflation without the need for supplemental funds from the general fund that is based on taxes and fees. Fee Comparison To provide context to the recommended fee, BC&A has conducted a survey of other public entities that currently charge storm water user fees. Figure 4-2 shows the current storm water user fees of other communities with the recommended fee for Millcreek. The figure shows Millcreek at $8.83, which is the bill for Class 1 customers (Single-Family Residences with Lots 11,000 Square Feet or under). Class 1 customers account for 75% of Single-Family Residences in Millcreek. ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS 27 $0.00 $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 $16.00 $18.00 $20.00 Cottonwood Heights Holladay South Salt Lake Lehi Tooele Cedar City Taylorsville West Point West Valley Woods Cross Clinton St. George Alpine Bluffdale West Jordan Murray Springville Salt Lake City American Fork North Salt Lake Riverton Sandy Payson Salem Bountiful Farmington Herriman Orem South Jordan Layton Pleasant View Midvale Ogden Centerville Millcreek Draper Spanish Fork South Ogden Provo Cedar Hills North Ogden Ivins Pleasant Grove Park City Typical SFR Storm Water Fee Data Source: Official website of referenced entity (accessed between January 2020 - March 2 $8.83 per month for Class 1 Customers (Single-Family Residences under 11,000 Square Feet, or 0.25 acres). These account for 75% of Single-Family Residences in Millcreek Figure 4-2 Utah Survey of Storm Water Utility Fees for a Single-Family Residence ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS 28 As shown in Figure 4-2, current fees throughout the State of Utah vary significantly depending on system needs and how each entity chooses to fund its system. Fees currently range from $3.00/month to $19.00/month. Thus, the recommended fee for Millcreek lies in the upper middle range of storm water fees. This is because of the unique situation the City is in related to its aging capital infrastructure and historic underfunding of storm water projects. REVENUE PROJECTIONS To assist Millcreek in understanding the implications of adopting a fee from an accounting, budgeting, and cash flow standpoint, Table 4-4 is included in this report. This table shows the projected revenue associated with the recommended fee. Table 4-4 Revenue Projections Fiscal Year Recommended Rate ($/ERU per month) Projected Revenue 2020-2021 $9.81 $3,476,000 2021-2022 $10.04 $3,574,000 2022-2023 $10.27 $3,674,000 2023-2024 $10.51 $3,777,000 2024-2025 $10.75 $3,884,000 ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS 29 CHAPTER 5 PUBLIC OUTREACH Because this fee (if adopted) would be new to City residents, it is especially important to explain the fee to the public and address their concerns. The City has sent a letter to Class 3 customers (such as Granite School District, St. Marks Hospital, and the Business Development Group) including information about the need for a storm drain fee and how it affects customers with large amounts of impervious areas. The City then responded to questions and comments from any Class 3 customers regarding the letter and virtually met with those who requested a meeting. The City has also maintained a prominent space on their website with information about the planned anticipated storm water utility and associated user fees. Their website currently includes two videos containing helpful information about the storm water system and the need for a storm water fee. Their website also included notices for the public open house where the public was encouraged to ask questions and comment in person or via email. Notices for the public open house were also placed in the Deseret News and the Salt Lake Tribune to invite interested residents to the open house. The recommended rate and policy structure were presented to City Council. Comments from the City Council are addressed in the rate study and policy manual. ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS 30 CHAPTER 6 CONCLUSIONS Based on the analyses completed as part of this study and documented in this report, the City can meet the increased revenue requirement of its storm water program by implementing a storm water fee. RECOMMENDED FEE It is recommended the City establish a storm water utility and implement a storm water fee to fund the required storm water program expenses. The recommended fee is $9.81 per ERU per month in the first year and increases at a rate of 2.3% each year. This recommended fee: • Meets projected storm water system maintenance and management revenue needs; • Accommodates the City’s recommendation to erase the need for a drastic change in fee in the future; • Provides resources that allow the City to meet federally mandated MS4 Permit activities; • Matches the year-to-year revenue; and • Results in a fee that is within the range of other storm water user fees in the state. ADOPTION/IMPLEMENTATION PROCESS The recommended process to adopt a storm water fee as calculated in this report includes the following steps: 1. Hold a public hearing and open house (open house already completed) to receive public comment on the proposed fee. 2. Prepare a Storm Water Fee Policy Manual that governs the administrative policies for the fee which include, but are not limited to: a. Fee Calculations b. Billing c. Customer Class Definitions d. Credits e. Customer Support. 3. Develop an ordinance that establishes the utility and institutes the user fee and other required items. 4. Adopt the new storm water program ordinance(s). 5. Upon approval of the user fee, the Millcreek Engineering Department and a third-party billing provider will need to develop billing systems and procedures in accordance with the ordinances and policies. RECOMMENDED MONITORING AND RATE STUDY UPDATES After the implementation of the storm water user fees, it is recommended that the City monitor customer responses, actual revenues, and actual system expenses for a period of two years. Following this initial observation period, the rates should be re-examined to determine whether a rate ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS 31 adjustment is needed. This procedure should be repeated every two to three years thereafter to ensure revenues are adequate to meet revenue needs. A comprehensive review of this rate study should be performed regularly to make adjustments for changing circumstances and to include updated data and assumptions about the future. It is recommended that the study be updated at least every 4-7 years unless obvious circumstantial changes require a more frequent update. ---PAGE BREAK--- 2020 STORM WATER UTILITY FEE ANALYSIS BOWEN COLLINS & ASSOCIATES DRAFT MILLCREEK STORM WATER UTILITY FEE ANALYSIS 32 APPENDIX A CITY PROJECTED EXPENSE AND REVENUE TABLES ---PAGE BREAK--- DRAFT Table A-1 Millcreek Historic and Projected Revenue Requirement Assumed Annual Rate of Inflation: 3.0% Estimated Estimated Budgeted Projected Projected Projected Projected Projected Projected Projected Projected Projected Item 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Administration $359,106 $359,106 $819,933 $846,784 $874,519 $903,168 $932,761 $963,329 $994,904 $1,027,521 $1,061,212 $1,096,015 Director/Designee $30,120 $30,120 $30,120 $31,024 $31,954 $32,913 $33,900 $34,917 $35,965 $37,044 $38,155 $39,300 Administration $10,336 $10,336 $12,403 $12,775 $13,159 $13,553 $13,960 $14,379 $14,810 $15,254 $15,712 $16,183 SW Engineer $174,950 $174,950 $174,950 $180,199 $185,604 $191,173 $196,908 $202,815 $208,899 $215,166 $221,621 $228,270 SW Lead Inspector $143,700 $143,700 $143,700 $148,011 $152,451 $157,025 $161,736 $166,588 $171,585 $176,733 $182,035 $187,496 SW Inspector $0 $0 $120,100 $124,304 $128,654 $133,157 $137,818 $142,641 $147,634 $152,801 $158,149 $163,684 SW Inspector $0 $0 $120,100 $124,304 $128,654 $133,157 $137,818 $142,641 $147,634 $152,801 $158,149 $163,684 Rocky Mountain Power Billing Contract $0 $0 $90,000 $93,150 $96,410 $99,785 $103,277 $106,892 $110,633 $114,505 $118,513 $122,661 Billing Specialist $120,360 $124,573 $128,933 $133,445 $138,116 $142,950 $147,953 $153,132 $158,491 $164,038 Storm Water Coalition $8,200 $8,446 $8,699 $8,960 $9,229 $9,506 $9,791 $10,085 $10,388 $10,699 Operations $384,000 $384,000 $747,763 $746,956 $758,409 $778,708 $805,244 $832,687 $861,070 $890,423 $920,781 $952,178 Operations Lead $76,704 $103,655 $132,154 $162,270 $167,138 $172,152 $177,317 $182,636 $188,115 $193,759 Operations Crew $64,049 $86,986 $111,457 $137,541 $142,375 $147,380 $152,560 $157,923 $163,474 $169,220 Operations Crew $64,049 $86,986 $111,457 $137,541 $142,375 $147,380 $152,560 $157,923 $163,474 $169,220 Vactor Truck $55,397 $75,236 $96,402 $118,962 $123,143 $127,472 $131,952 $136,590 $141,392 $146,362 Sweeper $53,719 $72,956 $93,480 $115,357 $119,412 $123,609 $127,954 $132,451 $137,107 $141,926 Camera Truck $49,845 $67,695 $86,739 $107,038 $110,800 $114,695 $118,726 $122,900 $127,219 $131,691 County Contract (Phase Out) $384,000 $384,000 $384,000 $253,440 $126,720 $0 $0 $0 $0 $0 $0 $0 Capital Expenditures $1,237,000 $757,000 $1,526,000 $1,571,780 $1,618,933 $1,667,501 $1,762,546 $1,769,052 $1,822,124 $1,876,788 $1,983,762 $1,991,084 Emergency Reactionary Capital Spending $250,000 $772,500 $795,675 $819,545 $844,132 $869,456 $895,539 $922,405 $950,078 $978,580 Additional Storm Drain Investigation $500,000 $0 $0 $0 $0 $0 $0 $0 $0 $0 Master Planning Updates $0 $0 $0 $0 $45,020 $0 $0 $0 $50,671 $0 Proactive Capital 10 year average spending $776,000 $799,280 $823,258 $847,956 $873,395 $899,597 $926,585 $954,382 $983,014 $1,012,504 Debt $0 $0 $410,000 $410,000 $410,000 $410,000 $410,000 $410,000 $410,000 $410,000 $410,000 $410,000 Public Works Yard (Savings) $410,000 $410,000 $410,000 $410,000 $410,000 $0 $0 $0 $0 $0 Public Works Yard (Debt) $0 $0 $0 $0 $0 $410,000 $410,000 $410,000 $410,000 $410,000 Total $1,980,106 $1,500,106 $3,503,696 $3,575,520 $3,661,862 $3,759,377 $3,910,551 $3,975,068 $4,088,098 $4,204,731 $4,375,755 $4,449,277 ---PAGE BREAK--- DRAFT Table A-2 Millcreek Existing and Projected Customer Base by Customer Class (Effective ERUs) With 0.5% Growth Rate Estimated Estimated Analyzed Projected Projected Projected Projected Projected Projected Projected Projected Projected Customer by Class 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Single Family (under 11,000 SF) 8,601 8,644 8,687 8,731 8,775 8,818 8,863 8,907 8,951 8,996 Single Family (over 11,000 SF) 6,788 6,822 6,856 6,890 6,925 6,959 6,994 7,029 7,064 7,100 Commercial / Institutional / Civic 9,337 9,384 9,431 9,478 9,525 9,573 9,621 9,669 9,717 9,766 Multi Family Stacked 3,267 3,283 3,300 3,316 3,333 3,350 3,366 3,383 3,400 3,417 Multi Family (townhomes) 1,519 1,527 1,534 1,542 1,550 1,558 1,565 1,573 1,581 1,589 Total ERUs 29,513 29,660 29,808 29,957 30,107 30,258 30,409 30,561 30,714 30,868 Table A-3 Millcreek Historic and Projected Expenses and Revenues Estimated Estimated Budgeted Projected Projected Projected Projected Projected Projected Projected Projected Projected Item 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Total Expenses $1,980,106 $1,500,106 $3,503,696 $3,575,520 $3,661,862 $3,759,377 $3,910,551 $3,975,068 $4,088,098 $4,204,731 $4,375,755 $4,449,277 Total Non-Rate Revenue $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Scenario 1: Do Nothing and Keep Existing Rates Total Rate Revenues $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Total Revenues $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Revenue Surplus (-Shortfall) -$1,980,106 -$1,500,106 -$3,503,696 -$3,575,520 -$3,661,862 -$3,759,377 -$3,910,551 -$3,975,068 -$4,088,098 -$4,204,731 -$4,375,755 -$4,449,277 Scenario 2: Meet Revenue Need with Initial and Annual Increases Total Rate Revenues $3,475,973 $3,573,700 $3,674,174 $3,777,474 $3,883,677 $3,992,867 $4,105,126 $4,220,542 $4,339,203 $4,461,199 Total Revenues $3,475,973 $3,573,700 $3,674,174 $3,777,474 $3,883,677 $3,992,867 $4,105,126 $4,220,542 $4,339,203 $4,461,199 Revenue Surplus (-Shortfall) -$27,723 -$1,820 $12,312 $18,096 -$26,874 $17,799 $17,029 $15,811 -$36,553 $11,923 ---PAGE BREAK--- 154 E. 14075 S. 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