Public Utility Committee -- work session thread

[Don Zimmerman]

This thread in intended for general council discussion of PUC items in between public meetings.

AGENDA ITEM COMMENTS:
Mr. Bill Worsham submitted these interesting questions and observations regarding drainage fee reforms based on impervious cover calculations.

Comments based on the attached memo dated April 10, 2015 from Victoria Li, Watershed Protection Dept. Director, to Mayor and Council:

Under the existing formula, on a cost per square foot of impervious cover (IC) basis the drainage charges imposed on residential and non-residential properties are the same.

However, within the residential category, because the formula treats each individual dwelling unit equally regardless of the IC attributable to that unit, properties with greater than average IC per dwelling unit (including most single-family homes*) are undercharged per square foot of actual impervious cover, while dwelling units in multi-family properties are overcharged. This was the crux of the Poole v. City of Austin judgment.

The new drainage charge regime based on impervious cover presupposes the following:
a. Council’s policy goal is to charge based on a property’s relative contribution to the runoff quantities for which the city must provide drainage facilities. QUESTIONS: Is this the policy goal? Should the calculation be based on a property’s total runoff, or net additional runoff created by IC? (Or something else considering what the charge pays for?)
b. Impervious surface area and percent impervious cover are the variables best suited to formulate such charge. QUESTIONS: What is the relative importance of these two variables—are they comparable or is one far more important than the other? Given the range of services funded by the charge, do they best represent the “user fee” premise?
c. The level of the charge is back-calculated from WPD’s revenue requirement. QUESTION: Is the revenue used exclusively for the purposes desired by Council—if not, for what other uses are drainage charges used?

While city staff proposes to allocate the charge based, in part, on square footage of IC, it also adds an “adjustment factor” based on percentage IC. The “neutral” percentage is the city average across all properties (residential and non-residential) of 52.9%. Higher percentage IC results in a factor greater than 1.0, lower percentage results in a factor lower than 1.0.

Comments:
1) Council should not overlook its authority to determine the appropriate revenue target of this charge in the context of the city budget, as well as to evaluate the costs incurred (public and private) to administer the charge.
2) On its face, a formulation based partly on IC square footage seems sensible, as does the equivalent treatment of residential IC with non-residential IC (assumes the effects on runoff are similar).
3) The Adjustment Factor scale extends from “less than 0.2” to 1.76 and appears to result from a linear regression through an unspecified data set. Because the upper end of the percentage IC scale includes more non-residential and multi-family residential properties and the lower end includes more single-family residential properties, the formulation of the scale determines the relative impacts among property types. Staff likely already has a matrix of different property types and effects thereon.
4) A formulation based partly on percentage IC may improve the “accuracy” of the calculation of a property’s contribution to runoff, but it reduces the transparency of the charge and opens up the process to rent-seeking.
5) Absent a clearly-articulated relationship between the variables used and the cost of programs funded by the charge, the ability to point to objective metrics for the formulation is lost. It will simply be a political calculation.
6) The formulation must be fully vetted by the committee such that the relative effect on property types is understood.
7) The committee should expect staff to discuss the incentives created by the proposed formulation on new development and redevelopment.
8) Somewhat off topic--The staff memo mentions various exemptions from the charge. This is one of probably hundreds of examples of hidden transfers or grants within the city budget. Council should endeavor to flush these transfers out of individual programs and account for them in a more transparent fashion. Means testing by department is inefficient. If a charge is to be discounted or eliminated for some, then means test centrally and pay out of a common city subsidy account.

*The residential charge of $9.80/month is based on a city-wide average of 1,763 square feet (sf) of IC per residential dwelling unit. A property consisting of the minimum legal lot size (5,250 sf) with the maximum presently allowable 45% IC includes 2,363 sf, or 34% more than the average. A large house with paved driveway, patio, etc could be double or triple the average.

Regards,
Bill

W.L. “Bill” Worsham, PE
Director of Coastal Engineering