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Creating and Funding Effective Stormwater Management: Financing a Stormwater Utility Through Parcel-Based Fees

Creating and Funding Effective Stormwater Management: Financing a Stormwater Utility Through Parcel-Based Fees

Christopher Denny


The United States needs better stormwater management practices.[1]  Non-point source pollution – diffuse discharge of polluted runoff into waterways – is the “largest single source” of water pollution.[2]  Climate change, poor drainage systems, and overdevelopment without stormwater control threaten downstream communities.[3]  Inadequate funding contributes to the lack of stormwater policies and leads to flooding and reductions in water quality.[4]  EPA estimates that nationwide wastewater treatment facilities need $388 billion over the next twenty years to adapt for climate change.[5]  Stormwater utilities and local governments find financing stormwater management difficult because collecting money to pay for public benefits usually constitutes a tax.[6]  Legislatures, not local stormwater utilities, have the power to levy taxes.[7]  Because courts consider water pollution and flood control a public benefit, creating a nuanced fee structure to pay for stormwater management is crucial to withstanding a legal challenge of the fee.[8]  The solution is to charge for stormwater management by implementing a parcel-based billing system with bill-credit options.  This is the most equitable way local governments can charge fees for the stormwater service because the fee is particularized and semi-voluntary.

Part I of this Note describes different stormwater management solutions and outlines the impacts on the watershed that result from poor stormwater management practices.  The Note addresses two key approaches: grey infrastructure development and green infrastructure development.  Grey infrastructure involves piping the stormwater to a treatment facility, while green infrastructure improves the natural hydrologic process by absorbing and filtering stormwater on-site.[9]

Part II explains what legal authority enables local governments to manage stormwater. Namely, on the Federal level, statutes like the Clean Water Act, which requires point-source regulation through the Nation Pollutant Discharge Elimination System, serve as the basis for federal water pollution control by creating effluent discharge limitations at a point source discharge.[10] On the state level, many states possess legislation that delegates authority to local governments to manage stormwater.[11] The discussion of the legal authority in this section also highlights where these applicable laws lack efficacy at managing stormwater runoff. 

Part III outlines the basis for stormwater utility capitalization.  Stormwater utilities or local municipalities, without the power to tax, raise revenue to support stormwater by creating fees.  When the fee structure is challenged, the federal courts apply the San Juan Cellular test to determine whether the assessment is an unconstitutional tax or a permissible fee.[12]  Under this test, the court reviews the entity that created the fee, the population served, and how the entity uses the money.[13]  When the entity is not a legislature, the population is narrow, and the collected money provides the rendered service, the court will likely find the charge a permissible fee.[14]

Finally, Part IV is a case study on the Philadelphia Water Department’s stormwater management billing system.  Philadelphia’s plan debuted in 2010 as the “Green City, Clean Waters” stormwater management plan.[15]  Philadelphia Water Department implemented a parcel-based billing system for its stormwater service charge.[16]  The Water Department charges a stormwater fee particular to each non-residential parcel based upon its gross area and impervious area, effectively and equitably charging the parcel for its impact on stormwater.[17]  Non-residential property owners have the option to reduce their charge by implementing on-site stormwater management practices that decrease the property’s release of stormwater runoff.[18]

The parcel-based system, with an opportunity to reduce the bill via stormwater credits, is the most equitable stormwater management fee structure.  Instead of charging a flat rate, the fee system fairly apportions the cost of stormwater management to each property by evaluating each parcel for its gross area and impervious area.  Furthermore, by using a credit system, the stormwater authority creates an incentive for property owners to reduce stormwater runoff.  A stormwater management system like this fairly distributes the costs of stormwater management, encourages self-management, and increases onsite groundwater recharge.  Faced with increased flooding due to climate change and a presidential administration determined to reduce federal regulations,[19] it is imperative that local authorities implement stormwater management programs to reduce nonpoint source pollution.

Questions and inquiries regarding this Note may be forwarded to the author at LawReview@vermontlaw.edu.


[1] William L. Andreen, Success and Backlash: The Remarkable (Continuing) Story of the Clean Water Act, 4 Geo. Wash. J. Energy & Envtl. l. 25, 27 (2013).

[2] Id.

[3] Source Water Quality and Quantity, Philadelphia Water Department, http://www.phillywatersheds.org/watershed_issues/water_quality_quantity (last visited Feb. 10, 2016).

[4] Id; Andreen, Success and Backlash: The Remarkable (Continuing) Story of the Clean Water Act, supra note 1, at 27.

[5] Office of Water, U.S. Envtl. Protection Agency, Rep. No. EPA-816-R02-020, The Clean Water and Drinking Water Infrastructure Gap Analysis 19 (2002).

[6] DeKalb Cty., Georgia v. United States, 108 Fed. Cl. 681, 701 (Fed. Cl. 2013).

[7] Id.

[8] Id.

[9] U.S. Environmental Protection Agency, Stormwater Management Practices at EPA Facilities, https://www.epa.gov/greeningepa/stormwater-management-practices-epa-facilities (last visited Feb. 10, 2016).

[10] 33 U.S.C. § 1342 (2012).  The NPDES program was designed to clean up effluent from large industrial polluters and publically owned treatment works, but is one way the Clean Water Act can be construed to support stormwater management and stream health.

[11] See e.g. 32 Pa. Stat. and Cons. Stat. Ann. § 680.1 (West 2016) (Pennsylvania Stormwater Management Act).

[12] San Juan Cellular Tel. Co. v. Pub. Serv. Comm’n of Puerto Rico, 967 F.2d 683, 685 (1st Cir. 1992).

[13] Valero Terrestrial Corp. v. Caffrey, 205 F.3d 130, 134 (4th Cir. 2000).

[14] Id.

[15] Philadelphia Water Department, Big News: Green City, Clean Waters Blows Past Year Five Targets, Watersheds Blog (June 20, 2016), http://www.phillywaterhseds.org/big-news-green-city-clean-waters-blows-past-year-five-targets.

[16] Phila., Pa., Water Department Reg. § 4 (2016).

[17] Phila., Pa., Water Department Reg. § 4.3 (2016).

[18] Phila., Pa., Water Department Reg. § 4.5 (2016).

[19] Source Water Quality and Quantity, Philadelphia Water Department, http://www.phillywatersheds.org/watershed_issues/water_quality_quantity (last visited Feb. 10, 2016); See An America First Energy Plan, the White House, https://www.whitehouse.gov/america-first-energy (last visited Feb. 10, 2016) (“President Trump is committed to eliminating harmful and unnecessary policies such as the Climate Action Plan and the Waters of the U.S. rule.”).

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