DEPARTMENT: Transportation & Capital Improvements (TCI)
DEPARTMENT HEAD: Mike Frisbie, P.E.
COUNCIL DISTRICTS IMPACTED: City Wide
SUBJECT: Storm Water Utility Fee Update
SUMMARY:
Transportation and Capital Improvements (TCI) will provide an informational briefing on the revised Storm Water Utility Fee approved as part of the FY 2016 Budget. The briefing will include an overview of the program since the implementation of the revised fee in January 2016.
BACKGROUND INFORMATION:
The Storm Water Utility Fee was established by City Council in 1993 to fund various storm water management and operational services related to the Municipal Separate Storm Water Sewer System (MS4) Permit. The fee prior to FY 2016 was based on lot size and land use and was last increased in FY 2008. Through nearly a two year process and significant stakeholder outreach, the fee methodology was revised to be based on impervious cover which has a direct relationship to the amount of storm water runoff generated from a property.
The revised rate structure improves rate-payer equity, recovers the required funding to support the utility’s cost of service, and promotes storm water best management practices. The effect of the revised rate structure on most residential properties was minimal. Approximately 72% of residential properties remained at or below their previous monthly fee. Non-residential properties experienced a more equitable rate treatment compared to the previous rate design. Approximately 27% of non-residential properties remained at or below their current monthly fee with the revised rate structure and 71% increased by less than $100 per month.
Throughout the development of the revised rate structure, three main concerns were raised during the stakeholder process:
A. High Monthly Fee/ Rate Cap Removal
The removal of the “rate caps” included in the previous rate structure would result in significantly increased monthly fees for large, non-residential customers. TCI created a key stakeholder focus group which included chairs of the San Antonio Chamber of Commerce, North San Antonio Chamber of Commerce, and Real Estate Council to develop a revised rate structure to help mitigate the potential high fees.
B. Revenue Requirements
TCI had originally proposed a FY 2016 funding need of $48.3M; however, the additional revenue and corresponding services were reprogrammed over several years to help mitigate rate increases and as a result of stakeholder feedback. TCI developed a 5-year rate plan with revenue requirements ranging from $45M in FY 2016 to $52.5M in FY 2020 as compared to the FY 2015 Budget of $41M. An additional rate increase is anticipated to be proposed as part of the FY 2017 Budget.
C. Methodology
Some stakeholders still preferred to maintain the old rate structure. However, the previous billing methodology based only on lot size and land use did not fully account for the impact of large properties on the receiving drainage system. The amount of impervious area has a direct relationship with runoff volume and rate, and is the best measure of drainage system usage. In addition, large amounts of impervious area can adversely impact water quality by limiting the amount of pollutants that get filtered from property runoff.
Through continued dialogue with all stakeholders, TCI developed a rate structure that meets the funding requirements for operational services related to the MS4 Permit in the most equitable manner practical while promoting storm water best management practices.
ISSUE:
Since January 2016, TCI has processed approximately 1,600 inquiries relating to the revised rate structure. The inquiries span from general questions about impervious cover to incorrect property classifications. In addition, a billing error related to multiple accounts on a single parcel of land was discovered and resolved. Lastly, a policy question has been raised for consideration relating to small, multi-family accounts.
The revised rate structure includes two user groups, “Residential” and “Non-Residential”. The previous structure included four users groups defined as follows:
1) Residential - Owner or occupant containing a single or multiple family dwelling unit composed of two (2) or less family units.
2) Multi-Family - Owner or occupant containing a multiple family dwelling unit comprised of more than two (2) family units.
3) Commercial - Owner or occupant not meeting the definition of Residential, Multi-Family, or Public.
4) Public - Owner or occupant containing an improvement related to the provision of governmental services, public or private education, or religious activities and as so classified in records of the Bexar Appraisal District.
The definition of “Residential” did not change with the new rate structure; however, the remaining three categories were consolodated to form the “Non-Residential” user group since the rates are based on the amount of impervious cover.
Soon after the new rate structure became effective in January 2016, Council District 1 expressed concerns about the inclusion of triplex and quadplex properties in the “Non-Residential” rate category. On average, these parcels have a monthly fee increase from $7.19 to $58.71 - this is the total fee per parcel and should be divided by the number of tenants (three for a triplex or four for a quadplex) unless otherwise determined by the property owner.
Since the creation of the storm water fee in 1993, residential accounts have included single-family and duplex homes, whereas triplex and quadplex have been considered multi-family (non-residential). One of the factors in determining the “Residential” classification for single-family and duplex properties was to reference how these properties were classified by the Texas Comptroller’s Office. Less than or equal to two dwelling units is considered residential in use and above two dwelling units is considered non-residential in use since the owner is typically not a dweller and uses these for rental purposes.
However, should there be a change in the two-decade old policy in which triplex and quadplex properties would be reclassified as “Residential”, the rate structure would need to be revised accordingly. TCI conducted an account review of approximately 2,300 small multi-family accounts to identify triplex and quadplex properties. The account summary is shown in the table below.
|
Type |
Accounts |
Parcels |
Avg % IC* |
Total IC (sf) |
|
Triplex |
277 |
252 |
57% |
1,290,414 |
|
Quadplex |
664 |
586 |
61% |
3,394,686 |
|
Total |
941 |
838 |
--- |
4,685,100 |
*Single-family properties have an average of 45% Impervious Cover.
Note: The account review data was performed using the master billing file in which the effective rate structure is based upon. As part of on-going account management, there have been updates to the master billing file such as the addition of new accounts or changes to existing accounts. However, for comparison purposes the analysis shown utilizes the original master billing file.
A. Residential Accounts
Residential properties typically have very similar land use characteristics when comparing neighboring properties. Therefore, a flat, per account monthly fee is assessed among residential properties and is tiered based upon a range of impervious area.
1) Reclassifying 4,685,100 sf of impervious cover from “Non-Residential” to “Residential” equates to a 0.37% increase which yields approximately $80,000 of additional revenue to be generated by residential accounts.
2) Each of the “Residential” tiers could be adjusted marginally to account for the additional revenue need. However, since the rate structure is only billable to the nearest $0.01, the rates per tier would not be adjusted and the revenue loss would be absorbed.
B. Non-Residential Accounts
Unlike residential properties, land use characteristics for non-residential properties can vary widely when comparing neighboring properties; therefore, the rate structure was developed differently. The monthly fee developed for non-residential accounts includes two components as a result of extensive stakeholder feedback. A flat, per account monthly “Base Fee” is assessed among non-residential properties and a monthly “Impervious Fee” is assessed on a cost per square foot basis. This hybrid method significantly reduces the cost per square foot of impervious cover from some of the initial rate models.
1) The current estimated annual revenue from the identified triplex and quadplex accounts is approximately $590,000 [$58.71 / Month x 838 Parcels x 12 Months]. As discussed above, reclassifying triplex and quadplex properties would shift approximately $80,000 of revenue to “Residential” leaving a deficit of $510,000 to spread among remaining non-residential accounts. The deficit amount would keep the same proportion between “Base Fee” and “Impervious Fee” with the rate structure currently in effect (61% to 39%, respectively).
2) With the removal of 838 parcels and the additional $311,100 [$510,000 x 61%] to generate, the new “Base Fee” equates to $59.31.
3) The remaining $198,900 [$510,000 x 39%] would be generated by the “Impervious Fee” and equates to a 2.17% increase which would be spread across the impervious cover associated with the remaining non-residential accounts.
The primary use of properties with greater than two dwelling units is non-residential and used for commercial interests. Therefore, TCI does not recommend reclassifying triplex and quadplex properties as “Residential”.
ALTERNATIVES:
N/A
FISCAL IMPACT:
N/A
RECOMMENDATION:
N/A