Policy Study

Preparing for the Storm

Preserving Water Resources with Stormwater Utilities

Executive Summary

Common practices for protecting water resources often fail to maintain either good water quality or healthy ecosystems. This failure is not due to a failure to control pollutant releases of sewage and industrial effluent so much as it is due to altered hydrology caused by the handling of stormwater runoff. Numerous studies link uncontrolled stormwater runoff from areas with impervious surface exceeding 10 percent to a rapid decline in water quality and stream health. Streams draining residential suburbs with typically high levels of impermeable surface experience two to five times the stream-channel enlargement of areas with less impermeable surface, endure increased flooding, are prone to low flow during droughts, and are biologically nonsupporting.

Traditionally, public entities have managed urban water resources using what might be characterized as a civil engineering, or technocratic approach that treats stormwater as a waste product of development. But the hydrologic cycle is too complex to respond predictably to such a rigid, narrow approach. Moreover, this approach reinforces, or even encourages, land-use practices that can substantially disrupt the hydrological cycle.

Responsibility for stormwater management is generally dispersed between various government agencies and departments. Stormwater systems are rarely built to handle runoff from anticipated future development. Inadequate design coupled with a lack of funds for maintenance often force managers to react to problems such as poor water quality and flooding with short-term, piecemeal solutions.

A number of political jurisdictions scattered across America are implementing innovative approaches to stormwater management. One such approach is the creation of user-fee based stormwater utilities to improve urban watershed and stormwater management. Case studies show that communities adopting this form of management can produce better water quality, healthier urban ecosystems, and improved quality of life. Such systems link the decisions of people who impact stormwater flows to the stormwater management system directly through a fee system linked to usage and impacts.

The cost-based, user-fee-funded stormwater utility encourages the recognition of stormwater as a resource, not simply as an event to be managed. The utility concept focuses management in a single organization, which can be public, private, or some combination thereof. Creation of a utility allows for dedicated infrastructure and management funding, with fees tied to impacts. The approach enables development of comprehensive preventative and enhancement programs.

New federal requirements for stormwater permits affecting smaller cities and court-mandated enforcement of the Clean Water Act on a watershed basis are spurring many municipalities to consider the user-fee concept for dedicated funding of improved stormwater management. Over 350 stormwater utilities have been formed nationwide, most in the last decade.

Stormwater utilities can provide an equitable means for many communities to fund improvements in water quality and reduce flood damage. However, achieving the goal of swimmable and fishable waters stated in the Federal Clean Water Act may eventually require additional steps such as comprehensive water resource management that combines water supply, sanitary sewage, stormwater drainage, and wildlife protection under a watershed-scale integrated water utility.

Three case studies illustrate the experiences of cities that have established stormwater utilities. Stormwater utilities can encourage development that uses natural hydrological cycles to maintain water quality and flourishing ecosystems. Bellevue, Washington, which established one of the first stormwater utilities in the nation, demonstrates that designing “with nature” can reduce the negative impact of impervious surfaces on aquatic systems, while creating highly desirable neighborhoods. Charlotte, North Carolina shows that stormwater controls can be retrofitted to already-developed neighborhoods through bioengineering of retention ponds and other steps such as stream-habitat improvements. Atlanta’s experience is more mixed, showing how the technocratic approach to water management is unsustainable, and a case history of mistakes to avoid in establishing a stormwater utility.

Rather than adopting growth boundaries or other regulatory approaches that put broad areas of private land off-limits to development, this study recommends that a market-based approach integrating economic and ecosystem needs could be implemented based on the following principles:

  1. Implement cost-based user fees that equitably assign the cost of services, with customers creating the greatest impact paying the highest fee. A user-fee-based stormwater utility could set charges based on the amount of impervious surface area. Stormwater utilities could also reduce fees for on-site stormwater control, superior pollutant control, and protection of sensitive areas such as wetlands. User fees give land developers, builders, and property owners an incentive to minimize environmental impacts. User fees can also pay for mitigation of the negative impacts of development. In addition, user fees can lessen dependence on property taxes, which weaken the linkage between costs and benefits.
  2. Operate the stormwater utility using adaptive management. Adaptive management is defined as a process for improving resource management incrementally as managers and scientists learn from new experience and scientific findings. This process is in contrast to the more rigid civil engineering or technocratic approach traditionally used by public entities for managing water resources. Like other systems in nature, the hydrologic cycle, which recycles earth’s water, is dynamic, adapting to change through feedback loops that work to restore equilibrium. The cost-based, user-fee rate structure establishes a feedback loop between impacts on the natural system, and the fees charged to maintain nature’s services for recycling clean water. Performance is measured by evaluating stormwater damage to property and the health of the aquatic system.
  3. Reduce wasteful administrative conflicts through comprehensive water resource management at the local level by combining water supply, sanitary sewage, stormwater drainage, and wildlife protection under an integrated water utility that could be privately managed (or even privately owned).
  4. Purchase and preserve land with a high ecosystem value. Watersheds threatened with new development should be surveyed to classify the land according to its ecosystem value. Land with a high ecosystem value could be purchased and preserved by a regional stormwater or water resource utility, following a strategy of pollution prevention that could ultimately be less expensive and result in a more livable community.
  5. Reward owners of environmentally sensitive property, such as wetlands and vegetated stream buffers, who minimize disturbance. This can be approached in three ways: reduced fees, reduced property taxes, and the purchase of conservation easements that confer tax benefits. Where the ecosystem value of the land does not merit purchase but there is still a need to reduce disturbance, facilitating private stewardship in this manner provides a flexible alternative.
  6. Phase out or sharply restrict repeated claims on federal flood insurance. By paying property owners who repeatedly sustain flood damage, federal flood insurance has encouraged development on flood-prone, ecologically valuable land. During phase-out, payouts could be used to relocate people who are flooded to less flood-prone areas, rather than to fund rebuilding.
  7. Where practicable, replace federally managed efforts to control nature through public works projects such as construction of dams, levees, and dredging, with prevention-oriented watershed management.
  8. Make zoning and stormwater codes more flexible and effective by implementing performance-based measures tied to improvements in ecosystem health and reductions in flood damage.
  9. Address the issue of landscape fragmentation-the need for a connected network of riparian corridors- by fostering public-private partnerships that combine private funding with federal funds redirected away from federal public works projects and toward support of regional river-basin initiatives.
  10. Improve service and control costs by contracting with private companies for services where feasible.