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Environmental Services

working for clean rivers

Phone: 503-823-7740

Fax: 503-823-6995

1120 SW 5th Avenue, Suite 1000, Portland, OR 97204

Report to Council on Stormwater Management Charges

January 6, 2000
 
TO:                 Mayor Vera Katz
                      Commissioner Jim Francesconi
                      Commissioner Charlie Hales
                      Commissioner Dan Saltzman
                      Commissioner Erik Sten
 
FROM:           Dean Marriott
 
SUBJECT:      Report to Council of Stormwater Management Charges
 
The Bureau of Environmental Services respectfully submits the following report on stormwater management charges. The Bureau developed this report as directed by Resolution No. 35796, with guidance from Commissioners Saltzman and Sten, and with the assistance of the Portland Office of Transportation and the Bureau of Water Works.
REPORT TO COUNCIL
Alternative Methods of Financing
Portland’s Stormwater Utility
Prepared by the Bureau of Environmental Service
as directed by Resolution No. 35796, dated May 19, 1999
Portland, Oregon
January 6, 2000
  • Stormwater Rate Alternatives. The Bureau presents four methods of calculating stormwater management charges. The alternatives have the general effect of shifting monthly charges from properties that manage stormwater on-site to those properties that do not manage stormwater at all. Two of the alternatives rely on impervious area, a simple, efficient and widely accepted measure for allocating stormwater management charges. A third alternative introduces trip generation data to link stormwater management charges to use of Portland’s transportation system, the source of 70% of the demands on the stormwater utility. A fourth alternative uses a mix of five characteristics of property to closely link hydrologic factors to the allocation of charges.
  • Discount Programs. The City had a difficult experience when it first offered discounts for stormwater charges between 1992 and 1998. History suggests that the City exercise extreme caution in devising and implementing any new discount program, and that such a program complement and support other City environmental policies and programs. Discount programs are incorporated in each of the four rate alternatives to approximate their rate impacts, however the Bureau recommends that the City Council carefully address a number of policy and program issues before considering the reintroduction of a discount program.
  • Itemized Charges. For each rate alternative, the Bureau divided stormwater management charges into three components representing three major contributors to the demands of the utility: transportation uses (70%), property runoff (23%), and environmental protection and restoration (7%). The Bureau arrived at the 70% allocation for transportation uses by calculating the stormwater runoff and pollutant loads that are generated by public rights-of-way, versus those generated by private property. The Bureau’s methodology and calculations have been reviewed and approved by the Portland Office of Transportation.
  • Drainage Districts. The Bureau is exploring the feasibility of an intergovernmental agreement with the three Drainage Districts in the City (Peninsula No. 1, Peninsula No. 2 and Multnomah No. 1) to provide fair participation in Portland’s stormwater utility by properties located within the boundaries of the districts. The Bureau and Drainage Districts agree that these properties should participate to a limited extent in the transportation and environmental components of the stormwater management charges. The level of participation should be determined by considering the extent to which the Drainage Districts provide uncompensated stormwater management services which benefit the City.
  • Revenue Enhancements. The Bureau estimates that limited rate relief (a 2% to 3% reduction) would be obtained by expanding the utility rate base to include riparian properties and other properties not currently paying stormwater management charges. The City could reduce stormwater rates by nearly 25% by shifting the financial burden of environmental programs to a mix of new taxes, fees and general obligation debt. The reduction could be as high as 70% by shifting transportation-related costs to transportation based fees and taxes. The Bureau encourages a public discussion of alternative financing mechanisms, including local or regional general obligation bonds, gasoline taxes, sales taxes on commodities that increase the pollutant load in stormwater, and special assessments for violations of environmental regulations. Such a discussion should be broad enough to link stormwater management to the broader challenge of financing public infrastructure in Portland.
  • Program Reductions. Another way of holding down stormwater management charges is to cut programs. A one-dollar reduction in the current monthly residential stormwater management charge and a commensurate reduction in charges for commercial and industrial properties yields an annual revenue reduction of $2.7 million out of revenue requirements totaling $28 million. Such an annual revenue loss results in significant reductions in stormwater programs. For example, a $2.7 million reduction in resources is equal to the utility’s annual funding of watershed programs, lab services for stormwater monitoring, facilities planning and the stormwater utility’s share of the costs of the Endangered Species Act.
  • Program Enhancements. The Bureau recommends that the City Council coordinate efforts to restructure utility rates with program enhancements envisioned in the Clean River Plan. Through a combination of incentives, technical support and education, the City can mobilize significant private efforts to reduce the damaging effects of stormwater runoff.
 
There is a public hearing scheduled for January 19, 2000, followed by a series of neighborhood meetings to discuss these issues. These gatherings will provide a valuable opportunity to educate the public about the complexities of stormwater management. They will also provide an opportunity for ratepayers to express their opinions on the City’s rate reform efforts and hear a diversity of opinions.
 
The Bureau is prepared to provide briefings as requested throughout this important public process. In addition, the Bureau expects to receive and respond to requests from City Council for additional analysis and research in anticipation of rate-making for the coming fiscal year. The Bureau will do its very best to be responsive and supportive as City Council moves from the public process to rate-making and ultimately through implementation of reform proposals.
 
 
Portland’s current method for allocating stormwater costs is divided into two basic classes. Single family residences are charged a fixed monthly rate of $8.78 based on 2400 square feet of impervious area. All other properties pay a monthly rate of $4.01 for every 1000 square feet of impervious area. Impervious area is a widely accepted measure for allocating stormwater management costs. Impervious area is simple to calculate and understand, and serves as a reasonable representation of the amount of stormwater runoff which properties contribute to public facilities.
 
The Bureau of Environmental Services has prepared the following rate alternatives at the direction of the City Council. The Council’s intent is to move beyond the simple impervious area method and consider other methods for allocating utility costs. In particular, the City Council seeks alternatives that recognize private efforts to manage stormwater, and provide a stronger link between stormwater charges and the services provided by the stormwater utility. All rates and charges are expressed on a monthly basis.
 
 
Current Method with Discount. Charges based on impervious area. Discount for private stormwater management and water quality facilities.
 
Single Family Residence $6.86 fixed charge with discount. $11.04 without discount.
All Other Property $3.24 per 1000 square feet with discount. $4.98 without discount.
 
Groundwater District Alternative. Charges based on impervious area. Separate calculation of charges for property in areas served by sumps and drywells. Automatic exemption for the on-property component of the stormwater management charge for properties located within this "groundwater district". Discounts for all other property based on written application and qualification.
 
Single Family Residence $6.86 fixed charge with discount. $13.49 without discount.
All Other Property $3.24 per 1000 square feet with discount. $6.00 without discount.
 
Distributed Transportation Alternative. Transportation component of the monthly stormwater management charge based on average trips generated by property as estimated by the national Institute of Transportation Engineers. All other components of the stormwater management charge are based on impervious area. Discounts for on-property component of stormwater management charge.
 
Single Family Residence $4.14 fixed charge with discount. $8.32 without discount.
All Other Property Varies significantly based on property use and trip generation factors.
 
See attached schedule for estimated charges for 10 sample properties.
 
Hydrologic Alternative. On-property component of stormwater management charge based on five characteristics of property: soil type, topography, impervious area, tree canopy and property use. All other components based on impervious area. Discounts for on-property component of stormwater management charge.
 
Single Family Residence $7.06 to $13.18 per month based on the mix of on-site characteristics.
 
All Other Property $3.70 to $5.66 per 1000 square feet based on property characteristics.
 
 
The stormwater rates and charges described in this report are rough planning estimates, intended to illustrate the relative impacts of the several rate-making alternatives. The estimates will change significantly once the City Council has selected a desired rate structure, and the Bureau has completed the detailed and rigorous work to design rates that conform to standard utility rate-making practices. As with any planning effort, the Bureau’s estimates are the product of principles and assumptions, derived from the unique political, scientific, economic and historic context that defines stormwater management in Portland, Oregon.
 
The following principles and assumptions have guided the Bureau’s efforts to define alternative stormwater management rates and charges:
  • Portland receives between 80 and 100 billion gallons of precipitation annually, enough water to supply Portland’s domestic water needs for 4 to 5 years.
  • Portland’s varied topography, geology and history of infrastructure development have produced a complex stormwater management system, consisting of 1700 miles of pipes, 420 miles of ditches and culverts, 14,200 sumps and 365 ponds. These facilities convey, control, treat and dispose of stormwater runoff into streams, rivers and underground aquifers.
  • The City invests more than $28 million per year in stormwater facilities and operations. The three largest components of the annual stormwater budget include capital investments and debt service (44%), system operations and maintenance (30%), and environmental restoration and protection programs (26%).
  • Responsibility for these functional costs are divided among three general categories:
  • Transportation uses are responsible for 70% of the demands on Portland’s stormwater management systems. Nearly 2000 miles of public streets convey large volumes of polluted stormwater that must be collected, controlled and treated before being released into streams, rivers and underground aquifers.
  • Private properties are responsible for 23% of the demands on Portland’s stormwater utility by adding runoff to street systems and injecting excess stormwater into groundwater systems.
  • The remaining 7% of the demands on the stormwater utility are the responsibility of every Portlander to protect and restore our environment. This includes City efforts to restore the health of streams and rivers, rehabilitate endangered species and protect groundwater resources.
  • Monthly residential stormwater fees have grown by nearly 10% per year from 1977 to 1999. Adjusted for inflation, the fee increases have averaged 6.45%. Between 1990 and 1999, residential stormwater fees grew by 13% annually, and 9% adjusted for inflation. The pressure on rates and charges will continue to increase as the stormwater utility confronts new demands for facilities and services in response to the recent listing of salmon and steelhead trout on the endangered species list, and growing regulatory concerns about the environmental protection of groundwater resources.
  • Estimated rates and charges are based on utility revenue requirements in excess of $28 million for FY 99-00, and a utility rate base of nearly 637 million square feet of impervious area. The analysis does not include impervious area estimates for riparian properties and properties served by drainage districts.
  • Discount programs are limited to the on-property component of the utility charge and are fully financed within the stormwater utility. Administrative costs for the discount program assume relatively high eligibility criteria and requirements for documentation of on-site stormwater facilities.
  • The Bureau’s estimated rates and charges are based on the assumption that all properties and ratepayers are responsible for the costs of the transportation and environmental components of the stormwater utility.
 
The design of a discount program requires a delicate balancing of various City goals. The City Council must weigh the increased equity, fairness and consumer controllability that a discount program provides, against the increased administrative burden and increased stormwater rates that will result from an internally, self-financed program. The following questions define the scope and complexity of a discount program for stormwater management charges.
  1. Should the City offer discounts to all customers or limit the program to specific customer classes? Should the discount program be linked to other City policies or goals, such as the Clean River Plan?
  2. Should the City allow discounts for any private facility that detains, controls, treats and disposes of stormwater on-site? OR, should the City limit the discount to private facilities that meet or exceed stormwater standards?
  3. Should the City require full documentation of improvements (permits, inspection reports, receipts, etc) as a part of a discount application procedure? OR, should the City provide a simple application process and perform a random audit of applicants to assure compliance with City standards and criteria?
  4. Should the City’s discount application process include fines, penalties and the retroactive billing of stormwater charges in cases of false or fraudulent applications?
  5. Should the City charge an application fee for processing discount applications? OR, should the application process be funded by the entire customer base through the calculation of stormwater charges?
  6. Should the impact of discounts be fully financed by stormwater charges? OR, should the discounts be funded from other City resources?
The Bureau has performed research on past and existing programs to estimate the potential rates of participation in a stormwater discount program. The Bureau reviewed the records of more than 9600 participants in the stormwater discount program that the City offered between 1992 and 1998. The Bureau’s Downspout Disconnect Program surveyed and/or worked with nearly 42,000 properties located in the Willamette River and Columbia Slough watersheds. In addition, the Bureau researched the building records and performed site surveys of 350 properties located in east Portland. The Bureau offers the following observations to guide the City Council deliberations:
  • The 1992-1998 Discount Program attracted low to moderate participation from eligible property owners despite Bureau efforts to inform existing customers as well as new customers from east Portland. The Bureau estimates that between 20% and 25% of eligible property owners in east Portland participated in the program. The Bureau granted an average reduction in billable impervious area of 79% overall, and 77% for single family residences. The reductions in east Portland averaged 96% overall, and 86% for single family residences.
  • The Downspout Disconnect Program recently completed a phase of work in north and northeast Portland, an area comprising 30,480 single family residences. The Program reports an aggregate reduction in stormwater runoff of 57% from private property due to the use of drywells and downspout disconnects. Less than 10% of properties in the program area had drywells.
  • The Downspout Disconnect Program recently completed a survey of 11,686 of the 25,765 single family residences located in the central eastside and inner southeast Portland. The program reports that 29% of stormwater runoff from private property is diverted from combined sewers, and that an estimated 30% to 41% of additional runoff could be diverted through the efforts of the Downspout Disconnect Program. The survey found that 20% of the single family residences in the study areas had drywells.
  • The Bureau recently surveyed 350 properties in east Portland to determine the extent of on-site stormwater facilities. The survey found that less than 30% of properties have drywells, soakage trenches and pits, or other stormwater facilities, based on city and county building records.
Based on these findings, the Bureau calculated monthly rates and charges for each rate alternative based on a conservative assumption that discounts will exempt 50% of the affected rate base from paying the property component of the stormwater management charge. The actual impact of discounts is dependent on the program’s final design.
 
 
In March 1999, Commissioners Saltzman and Sten proposed the establishment of a "fair stormwater management fee schedule for the drainage district and riparian property owners to recover the costs of City stormwater work not covered by the proposed Street Maintenance Fees." The Bureau of Environmental Services has worked with staff of three Drainage Districts to identify an appropriate level of participation by properties served by these Districts.
 
As of this date, the Bureau and Drainage Districts have reached the following findings and understandings:
  1. Three independent Drainage Districts serve a combined area of more than 10,000 acres along the south shore of the Columbia River. The area is located within the Columbia River floodplain, a natural collection area for surface water runoff and groundwater infiltration from areas of east Portland south of Columbia Boulevard.
  2. Landowners within the Districts have invested in significant stormwater collection and pumping systems that are maintained and operated by the Drainage Districts. Property owners pay for the capital and operating requirements of the Drainage Districts through annual special assessments that are collected by Multnomah County. Their assessments pay for the following activities:
  • The operation and maintenance of a system of levees, and pumps that move excess water from protected properties, over the levees and out into the Columbia River.
  • The operation and maintenance of pumps, ponds, ditches, swales, culverts and other stormwater facilities that remove runoff from approximately 10,000 acres of land inside their service areas, including runoff from 1,044 acres of City streets.
  • The removal and treatment of additional runoff that originates from 3,520 acres of City streets that are located outside the boundaries of the Districts and extend south of Columbia and Sandy Boulevards.
  1. The Drainage Districts assist the City of Portland to achieve valuable economic development goals by facilitating private development within the Columbia River floodplain. All developments within the Drainage Districts are dependent on the ability of the Districts to maintain more than 25 miles of levees and remove millions of gallons of stormwater from low-lying properties.
  2. A "cross-subsidy" exists between the Drainage Districts and the City of Portland due to investments and expenses made by one party on behalf of the other. The components of the cross-subsidy include the following:
  • A significant portion of costs incurred by the Drainage Districts relates to stormwater runoff from public rights-of-way, pumping groundwater to stabilize the soils that support public streets, assisting with environmental restoration of the Columbia Slough, and handling excess stormwater runoff from areas south of the boundaries of the Drainage Districts. More than 60% of the expenditures (including debt service and excluding maintenance of levees) is attributable to the City of Portland.
  • The City of Portland spends more than $20 million per year to remove and treat stormwater from public rights-of-way, and to protect and restore the environment. These responsibilities and costs are held in common by all property owners of the City. Property owners within the Drainage Districts have avoided the burden of contributing their fair share to these stormwater management costs, despite their common use of the City’s street and transportation facilities and their direct link to the health of Portland’s environment.
  1. Any calculation of a "net" stormwater management charge to property within the Drainage Districts should be limited to the transportation and environmental components of the utility’s revenue requirements, net of cross-subsidies. Property owners pay the property component directly to the Drainage Districts in the form of their annual assessments.
The Bureau and Drainage Districts are completing an accounting of cross-subsidies, and have begun work on an intergovernmental agreement to establish a formal cost-sharing protocol. The agreement will build on top of existing agreements and partnerships, and limit the administrative burdens associated with extending stormwater rates to this new base of customers. The Bureau will bring the completed intergovernmental agreement to the City Council by April 1, 2000.
 
 
Resolution No. 35796 directs the Bureau to determine the portion of the stormwater management charge that relates to street maintenance activities and transportation uses. The City Council’s intent is to inform ratepayers of the fundamental relationship between stormwater management and transportation, and ultimately develop public support for proposals that will finance transportation-related stormwater management costs through transportation-based fees, charges and/or taxes. The City Council’s basic vehicle for conveying this message is the itemized stormwater bill that segregates the transportation component from all other components of the stormwater charge.
 
The Bureau estimates that public rights-of-way are responsible for 70% of the requirements of the stormwater utility, based on the quantity and quality of stormwater runoff. The Bureau arrived at the 70% by calculating the stormwater runoff and pollutant loads that are generated by public rights-of-way, versus those generated by private property. The Bureau’s methodology has been reviewed and approved by the Portland Office of Transportation. The model consists of the following components:
  1. The Bureau defines stormwater runoff as peak discharge (cubic feet per second) for a 10-year storm as calculated using the Rational Method. The Rational Method relies on acreage of property. For private property, the Bureau used data provided by the City’s geographic information system (GIS). For public rights-of-way, the Bureau used GIS data, as well as data provided by the 1998 Status, Condition and Value reports of the Portland Office of Transportation (PDOT). The report provides detailed information for 1967 miles of public rights-of-way, owned and operated by PDOT. Based on City GIS data, the Bureau estimated that an additional 4740 acres of public rights-of-way are owned by the Oregon Department of Transportation (ODOT).
  1. The Bureau divided each class of property into impervious and permeable components. For private property, the Bureau used GIS data. For public rights-of-way, the Bureau classified paved streets, sidewalks and curbs as impervious, and unimproved streets and landscaping as permeable. The Bureau estimated ODOT properties to be between 25% to 50% impervious.
  2. The Rational Method defines peak stormwater discharge as a function of the intensity of a storm and the acreage of property (Qp = CiA). The Bureau used an intensity factor (i) of 1.95 for private property and 2.72 for public rights-of-way. In addition, the Bureau used the following runoff coefficients (C):
    Impervious Private Property and Improved Streets .90 to 1.00 depending on topography
    Permeable Private Property .15 to .40
    Unimproved Streets .20 (average of factors for lawns/pasture/meadows)
    Sidewalks .30 (loose gravel areas and walks)
    Curbs .90
    Landscaping .20 (average of factors for lawns/pasture/meadows)
  3. The Bureau estimated pollutant loads of stormwater runoff by multiplying the peak discharge results times a weighting factor for each class of property. The weighting factor is a composite of pollution values for five common stormwater pollutants (total suspended solids, total copper, dissolved copper, total zinc and total phosphorus). The source for the data was Analysis of Oregon Urban Runoff - Water Quality Monitoring Data Collected from 1990 to 1996, prepared by Woodward-Clyde Consultants for the Oregon Association of Clean Water Agencies (June 1997). The Bureau used the following weighting factors:
Single Family Residential Property 1.67
Multi-Family Residential Property 1.67
Commercial Property 2.45
Industrial Property 2.50
Public Rights-of-Way 3.10
The Bureau applied this model in two separate analyses of transportation component. One study calculated the transportation component based on a survey of 56 intersections scattered throughout the City. The second study evaluated the transportation component based on citywide GIS data, organized by natural watershed. The two methods produced a range of results that established an average allocation factor of 70%.
 
The Bureau applied its research on the transportation component of stormwater costs to develop a method for allocating costs of the stormwater utility. The Bureau divided stormwater utility requirements into two categories: facilities and environmental programs. Based on the transportation research, the Bureau allocated 70% of each of these two categories of costs to transportation uses. The allocated the remaining 30% of facilities costs to the "property runoff" component, and the remaining 30% of the costs of environmental programs to the "environmental protection and restoration" component.
 
Stormwater Management Charges graph
 
 
The current level of ratepayer resistance suggests that the stormwater utility is reaching the limits of its capacity to finance stormwater management and environmental protection programs. This financial stress is compounded by increasing financial demands for such environmental responsibilities as the Endangered Species Act, the clean up of Portland Harbor and the protection of groundwater resources.
 
In this political and regulatory climate, the long-term stability of the stormwater utility may be dependent on the infusion of new resources or an expansion of the utility rate base. The Bureau estimates that limited rate relief (a 2% to 3% reduction) would be obtained by expanding the utility rate base to include riparian properties and other properties not currently contributing to the utility. The City could reduce stormwater rates by nearly 25% by shifting the financial burden of environmental programs to a mix of new taxes, fees and general obligation debt. The reduction could be as high as 70% by shifting transportation-related costs to transportation based fees and taxes.
 
The Bureau encourages a public discussion of alternative financing mechanisms, including local or regional general obligation bonds, gasoline taxes, sales taxes on commodities that increase the pollutant load in stormwater, and special assessments for violations of environmental regulations. Such a discussion should be broad enough to link stormwater management to the broader challenge of financing public infrastructure in Portland.
 
 
The City Council may consider reductions to the current stormwater management program as an alternative to or in addition to changes in utility rate structures. A one-dollar reduction in the current monthly residential stormwater management charge and a commensurate reduction in charges for commercial and industrial properties yields an annual revenue reduction of $2.7 million out of revenue requirements totaling $28 million. Such an annual revenue loss results in significant reductions in stormwater programs. For example, a $2.7 million reduction in resources could result in any one of the following program reductions:
  • A complete loss of current annual financing for watershed planning and management programs, re-vegetation work performed for the watershed program, stormwater monitoring and investigations performed by the Water Pollution Control Lab, and stormwater facilities planning. Also, more than 50% of the stormwater share of the City’s response to the Endangered Species Act.
  • A 42% reduction in current annual financing for stormwater operations and maintenance, including a commensurate reduction in the stormwater portion of the Bureau’s interagency agreement with the Bureau of Maintenance.
  • A one-time loss in the utility’s borrowing capacity of $30 million. This is roughly twice the projected capital requirements of the surface water management program over the next five fiscal years.
 
The Bureau recommends that the City Council coordinate efforts to restructure utility rates with program enhancements envisioned in the Clean River Plan. Through a combination of incentives, technical support and education, the City can mobilize significant private efforts to reduce the damaging effects of stormwater runoff. The Bureau recommends consideration of the following initiatives:
  • Offer free or discounted trees to property owners and organize tree-planting efforts in neighborhoods to increase the tree canopy and reduce the impacts of impervious development.
  • Provide technical assistance, education and training to property owners who wish to invest in on-site stormwater management facilities. Provide grants and low interest loans for on-site stormwater management facilities that exceed existing City standards.
  • Provide education and training on the proper use of herbicides, insecticides, fertilizers, and other potential pollutants. Develop a certification program for property owners who pledge to abstain from using these potential pollutants.
  • Increase the amount of rate relief provided to low income ratepayers who have made investments in on-site stormwater management facilities.
  • Provide discounts to property owners who are unable to install stormwater management facilities on their properties but do so elsewhere in the City as a part of a neighborhood or community initiative.