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Agenda Bill 4.B 05/16/2011
TO: FROM: SUBJECT Honorable Mayor and Members of the City Council through City Manager Pamela Tuft, Interim Director, Department of Water Resources and Conservation Resolution Accepting the Stormwater Program Funding Evaluation Report RECOMMENDATION It is recommended that the City Council adopt the attached Resolution Accepting the Stormwater Program Funding Evaluation Report. BACKGROUND hi April 2010 the DWR&C sought Proposals from consulting firms to conduct a focused evaluation of the City's stormwater management program and to quantify the benefits it provides to the wastewater utility. This analysis was sought, in part, to answer questions regarding whether it is appropriate to use Wastewater Utility funding to support the costs of storm drain and storm water system maintenance. The analysis is also intended to discuss the sufficiency of the City's storm water system, to identify improvements to optimize its effectiveness and to discuss options for funding such improvements. The firm of HDR was selected from the respondents to the Request for Proposals and a contract was executed. DISCUSSION The attached report reflects HDR's investigation, data collection, evaluation of the City's stormwater program, comparison of other cities' stormwater functions and funding, and preparation of conclusions and recommendations. Among HDR's conclusions is the following which can be found on page 31 of the report: "HDR believes the City's current funding of SWP costs through sewer rates is appropriate and meets the requirements of both cost of service principles and Prop 218...." The report provides the analysis and conclusion as defined, by the scope of work and contract. The report also defines alternative stormwater funding mechanisms available to the City should Agenda Review: no City Attorney Finance Director City Manager 7- 1 ow interest exist on providing a new funding source and/or a separate utility to cover the costs associated with existing or expanded stormwater services. At present, there is no funding source for existing property owners to participate in local and regional stormwater management solutions. The creation of a separate stormwater utility or parcel fee to fund capital improvements could assess the benefits of flood reduction and water quality projects either City-wide or, if done in concert with the County, on a watershed -wide basis. As stated in the Report (page 32), this can be a "complicated, time-consuming, and costly endeavor" and is not suggested for consideration before undertaking community outreach into the possibilities and options. Should the Council indicate interest in researching the feasibility of creating a stormwater utility and associated funding options, City staff would conduct the necessary investigation. If the Council wishes to continue to provide the current level of stormwater services, then continuing to do so through the Wastewater Utility Funds is a more reasonable and cost-effective approach (pages 28-32 of the Report). FINANCIAL IMPACTS There are no financial impacts associated with accepting this Report. If the Council agrees with the conclusions of the Report, limited stormwater activities will continue to be contained in the sewer enterprise budget and relevant to future wastewater rate -setting activities. It should be noted approximately 2% of a typical wastewater customer's bill is currently estimated to go to stormwater program services functions. DWR&C staff will continue to pursue avenues of stormwater program funding outside of the Wastewater Utility fund such as SCWA — Zone 2A special project funding and grants to fund flood reduction improvements within the community and the watershed. The Report may also provide an informational and analytical basis for other future funding and resource activities related to the stormwater policies, activities and facilities evaluated in the Report. ATTACHMENTS 1. Resolution 2. City of Petaluma Stormwater Program Funding Evaluation Report (HDR, April 2011) 2 Attachment 1 Resolution Accepting the Stormwater..Prograrn cl 2 Funding Evaluation Report „ 3 4 5 WHEREAS, the City of Petaluma conducts operation and maintenance activities to 6 ensure the function of .the community's storm ;drainagesystem; and, 7 8 WHEREAS, in 2010 the City Council directed staff of the Department of Water 9 Resources and Conservation to undertake an evaluation of tlie'funding mechanisms for 1.0 conducting the City"s stormwater program; and 11 12 WHEREAS, in S'eptember'2010 the City hired HDR, Inc. to undertake the evaluation; .13 and 14 15 WHEREAS, in consultation with City ,staff, HDR has produced the City of Petaluma 16 Stormwater Evaluation Report (April 2011), "the Report" which studies and evaluates the 17 current stormwater program, system deficiencies and planned improvements, funding 18 mechanisms and other agencies' systems; and 20 WHEREAS, the City's .;stormwater facilities help meet, -the primary sewer system 24 objectives, including protecting the quality of surface, water and groundwater; and 22 23 WHEREAS, wastewater .rates including the stormwater funding component, have been 24 and will continue to be adopted.bythe City through a public hearing process which meets 25 the notice and substantive .provisions of applicable law, including but not limited to 26 Proposition 218; and 27 28' WHEREAS, stormwater facilities protect wastewater system, customers by providing 29 flood reduction protection -by reducing sanitary sewer overflows and the severity of 30 flooding during peak storm events; and 31 32 WHEREAS, maintenance. .of 'City stormwater facilities`, and the reduction of 33 inflow/infiltration reduces'the demand on the wastewater collection and treatment system 34:" by reducing, the amount of flow through the City's treatment' facilities; and 3,5 .36 WHEREAS'; the Report concludes that the -portion of the stormwater program funded by 37 wastewater'' rates 'through the Wastewater' Utility Fund, estimated currently as 38 approximately two percent (2%) of a typical customer's'bi'lI., pays fore services essential to 39 the functioning of the wastewater system, and that said services, if not performed' by the 40 stormwaterprogram, wo'u'ld.increase costs to the Wastewater Utility Fund; and 41 42 WHEREAS, the Report further concludes that the current process for apportioning some 43 stormwaterprogram costs to the Wastewater Utility Fund meets the requirements of both 44 cost of service principles, and Proposition 218 nexus requirements because th_e funded 45 activities provide 'special benefit to the customers paying wastewater charges" and fees ,. 46 and do not ekceed the cost of providing the funded services. N 1 '2 3 4 5 6 7 8 9 10 11 12. 13 14 15 16 17 NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF PETALUMA AS FOLLOWS: 1. The above recitals are an accurate reflection of the City of Petaluma Stormwater Program Funding Evaluation (HDR, April 2011) (the "Report") contents and analysisrelatingto funding of some stormwater program costs by the Wastewater Utility Fund. 2. The Report is accepted as a document providing information and analysis relevant to (i) the allocation of certain Wastewater Utility Fund resources to the operation and maintenance of the City's stormwater system; (ii) future wastewater rate - setting actions by the City; and/or (iii) .other future funding and resource activities related to the stormwater policies, activities and facilities evaluated in the Report. 11 24,1111iN gam Gityrff P6tAdma A.pril:201.1 Wsr 4 000 PR1 12, AR 2385Iron Point Road Suite3OO Folsom, [A95630'87O9 010.817.4700 City of Petaluma _• m Ia ) Program Fundd Sf Il7 April 2011 Pamela Tuft Interim Director Department of Water Resources & Conservation Remleh Scherzinger; P.E. Engineering Manager Greg Clumpner HDR Project Manager Holly Kennedy, P.E. HDR'Utilities Group Manager License No. C74682 2121 N. California BI. Ste. 475 Walnut Creek, CA 94596 1f ... .:t. �. , vim..., v ., 2, t .KY t..W .�x.. Yd ., .... �. ✓,... -. .. x a.. ✓.<w?iai,ai H.J'1. .,s �:xs33':^ °: ✓sm+'Y._„a..�.., „�r, x x.. € Y �' .� TABLE OF CONTENTS Tableof Contents............................................................................................................... i Listof Tables ....................................................................................................................................... iii List of Figures ................ Listof Acronyms................................................................................................................................. iii Section 1 - Overview and Summary ....................................................................................1 1.1 The Current SWP Funding Mechanism................................................................................ 1 1.2 Proposition 218 Requirements................................................................................................ 1 1.3 Future Funding Needs............................................................................................................. 2 Section 2 - The Current Stormwater Program.......................................................................3 2.1 Description of the Existing Stormwater Program and Facilities ....................................... 3 2.1.1 Watershed and Service Area........................................................................................... 3 2.1.2 Major Stormwater Facilities............................................................................................ 5 2.1.2.1 Channel and Other Conveyance Infrastructure................................................... 7 2.1.2.2 Pumping Stations...................................................................................................... 7 2.1.2.3 Ellis Creek WRF......................................................................................................... 8 2.1.3 Related Stormwater Policies and Practices.................................................................. 8 2.1.4 Stormwater Program Costs.:........................................................................................... 9 2.2 Stormwater Program Benefits and Beneficiaries...............................................................10 2.2.1 Flood Protection..............................................................................................................10 2.2.2 Wastewater Collection and Treatment........................................................................ 11 2.2.3 Protection of Groundwater and Surface Water Quality ........................................... 11 2.2.4 Protection of Wildlife Habitat, Fish and Aquatic Species ......................................... 12 2.2.5 Benefits to Other Agencies............................................................................................ 13 2.3 Current Program Funding Mechanisms............................................................................. 15 2.3.1 Current Funding Sources..............................................................................................15 2.3.2 Current Rate Structure................................................................................................... 15 Section 3 - Stormwater Program Deficiencies and Planned Improvements ...........................17 3.1 System Deficiencies................................................................................................................ 17 3.2 Planned Improvements......................................................................................................... 18 0 685- i 50338-028 i4 °trlx:}'ir It- atzirraitivai.c>I'r tsf3�lsa} =;bra#c4at��itt 3.2.1 Drainage Channels......................................................................................................... 18 3.2.2 Regional Detention Facility........................................................................................... 18 3.2.3 Payran Flood Control Project........................................................................................18 3.2.4 Development -Specific Detention Facilities...:.............................................................18 3.2.5 Maintaining Hydraulic Capacities............................................................................... 19 Section 4 - Stormwater program :Funding Evaluation ........... .:............. ............................... . 20 4.1 Basis for Evaluating Funding Mechanisms........................................................................ 20 4.1.1 General Rate Setting Criteria........................................................................................ 20 4.1.2 Industry -Wide Rate Fundamentals.............................................................................. 21 4.1.3 Rate Setting and'Cost-of-Service.Principles................................................................ 21 4.1.4 Proposition 218 Requirements...................................................................................... 22 4.2 Alternative Stormwater'Fundiiig Mechanisms.................................................................. 22 4.2.1 Current and Historical Funding Practices.................................................................. 22 4.2.2 Discussion of Industry Standards for Funding Stormwater Programs .................. 23 4.2.2.1 Western Kentucky University Survey.................................................................. 24 4.2.2.2 Black & Veatch Survey........................................................................................... 24 4.2.3 Case Studies of Stormwater Rates................................................................................ 25 4.2.3.1 City of Santa Rosa, California............................................................................... 25 4.2.3.2 City of Vallejo, California...................................................................................... 26 4.2.3.3 City of Salinas, California...................................................................................... 26 4.2.3.4 Sacramento County, California............................................................................. 26 .4.2.3.5 Bakersfield, California............................................................................................ 26 4.2.3.6 City of Portland, Oregon........................................................................:............... 26 4.2.3.7 City of Issaquah, Washington ............................................................................... 27 4.2.3.8 City of Kitchener, Ontario, Canada...................................................................... 27 4.2.4 Alternative Stormwater Funding Mechanisms.......................................................... 28 4.2.4.1 A Separate Stormwater Utility.............................................................................. 28 4.2.4.2 Impervious Surface Area -Based Fees................................................................... 29 4.2.4.3 Funding From Related Agencies.......................................................................... 29 4.2.4.4 Stormwater Fee Collection Methods.................................................................... 30 4.3 Analysis of Beneficiaries and Equity................................................................................... 30 4.3.1 Basis for Funding Stormwater Program with Sewer Funds ..................................... 30 ii 0; GE5-1503338-028 ;C rt iiEai'c salui�t t94ta;r'iiii"i!'�v$}, ia� i aariiliii >+i gale:;�riiiit, a ..._..: ��.:::..�:�•..�: �A.ra�.:..r.: .. �__...r...._...,�...................,.t�ae:o �ti>»z.a1�-.L%•_..-. .....,....:i.v.... ....., .z-....,....: sx.a�r:�"- , j;.� 4.4 Conclusions.............................................................................................................................31 4.4.1 Reasonableness of Using Sewer Rates to Fund the City's SWP ............................... 31 4.4.2 Other Funding Options for SWP Capital and O&M Costs ....................................... 32 List of Tables Table 1 - Current Petaluma Sewer Rates............................................................................................ 16 Table 2 - Summary of Broader Funding Mechanisms Applied to Stormwater Programs.......... 20 List of Figures Figure 1 - Area Surrounding the City's Watershed............................................................................ 4 Figure 2 - City's Stormwater Collection Facilities............................................................................... 6 Figure 3 — Map of Petaluma Basin Zone'2A......................................................................................14 List of Acronyms AWWA American Water Works Association BMP Best Management Practices DWR State Department of Water Resources ERU Equivalent.Residential Unit FEMA Federal Emergency Management Agency hcf hundred cubic feet HDR HDR Engineering, Inc. (Consultant to the City) I/1 Infiltration,and Inflow ISA Impervious Surface Area NPDES National Pollution Discharge Elimination System O&M Operations and Maintenance RCD Resources Conservation District (for Southern Sonoma County) RWQCB Regional Water Quality Control Board SCWA Sonoma County Water Agency SSO Sanitary Sewer Overflow SWMP Stormwater Management Plan SWP Stormwater Program (City of Petaluma's) WRF Water Recycling Facility (the Ellis Creek WRF) Zone 2A Petaluma Basin Zone 2A 07685-150338-0128 f sc cti l' xialuar r ti�ri�id�°aler i'rva r�eaaa Fun �3,1_ liixidcifi �t.�. 7<.a., k ... SECTION w OVERVIEW AND SUMMARY The City of Petaluma (City) retained HDR Engineering, Inc., (HDR) in September 2010 to evaluate the City's approach to funding its stormwater program (SWP), including the City's current funding mechanism through sewer rates as well as potential alternative funding mechanisms. This report provides an overview of the City's stormwater facilities and discusses planned capital improvements needed to maintain and/or improve drainage channel hydraulic capacities. However, the primary purpose .of this report is to evaluate whether the use of the City's current SWP funding mechanism is reasonable and appropriate. In addition, HDR evaluated other funding mechanisms for funding future SWP costs, as well as mechanisms specific to future operating and capital improvements. 1.1 The Current SWP Funding Mechanism While there is not broad consensus within the industry on who should pay for stormwater program costs or what type of rate structure 'should be used. HDR has concluded that the City's current funding of its stormwater program through sewer rates can be justified based on the benefits to sewer customers. These benefits include: Reduced sewage collection and treatment costs. Protection of surface water and groundwater. IM Flood control. 0 Broader environmental benefits, such as protection and enhancement of fish and wildlife habitat. 1.2 Proposition 218 Requirements Regarding concerns about, fairness, equity, and,subsidies under California's Proposition 218,regulations, HDR believes, the sewer rate revenue used to pay for a portion_ of stormwater activities is an appropriate use of sewer funds, does not create subsidies, and is a fair and equitable means of charging City residents for stormwater program costs. This position is based on a review of industry practices, methodologies used by similar sewer/stormwater utilities, and basic cost -of - service principles. Also, SWP costs make up approximately 2% of the typical sewer customer's bill, and, in light of this, funding SWP costs through sewer rates is cost-effective and serves the City's residents and businesses well. 07685-'50338-028 1 '� w�.� .. „�%' .. �?."Stn, era. '" ... � .✓'.. ."i, .. � n, ., o. .. . +t. � G i."T".'..:%"F.ty" .3 Future Funding Needs u The City will need new funding sources for future replacements of existing stormwater facilities, maintenance 'of creek channel capacities, and improvements such as creek channel vegetation control and construction of flood -terrace "and detention systems. These new sources of,fundss should continue to demonstrate the relationship between benefits provided and costs paid by various City residents and businesses. 'The City will need »ew furi.ding sources for future replacements of existing stormwater;facilities, `ma.Jntenance of'creek. chann61: capacities, arJd,►mpr'oveinents =`;,such"as;:creek.channel vegetation;, r ;cantrirl,and canstrciction,.of:tlood f- - „ terrace and, detemlon systems: There are several potential' funding -related actions the City could pursue, which could eventually replace the current funding through sewer rates once they are.fully'implemented. These actions include: Forming a separate stormwater .utility with a service area covering, areas outside the City's sewer service area that.;also,benefit from the City's SWR Developing a new rate structure, such as impervious surface'area-based fees. Expanding joint funding opportunities from adjacent agencies such as the Sonoma County Water Agency(SCWA). The following sections discuss the current stormwater program (Section 2), deficiencies of stormwater facilities.and planned improvements (Section 3)., and the evaluation of stormwater funding mechanisms (Section.4). /,' L%CiS 5- 5 0 3 3 8 - 0 2 8 The City's SWP is similar to many other California communities.in that it has historically been a very small operation, which typically included vegetation control and debris removal from stormwater catch basins and drainage channels. Many older communities, including Petaluma, have at one point -had a "combined" sewer and stormwater collection system. The actual City boundaries encompass an area of approximately 116 square -miles, including hills to 400 feet above sea level. The open creeksand channels, and enclosed "stormwater facilities located throughout the City convey runoff from upstream,in the watershed through the City, to the Petaluma River, and eventually to the San Pablo Bay, approximately 12 miles to the south. Approximately 40 years.ago, the City made improvements that significantly separated stoririwater flows from the sewer collection system. These improvements reduced the peak wet weather flows in the sewer system. As a result the design capacity of the City's recently constructed Ellis Creek Water Recycling Facility,(WRF) did'not need to include the majority of peak wet -weather stormwater volumes. "` -non izing the xeplacerr ent or „ sii ihning`of:degraa!ed,lines ;ensures 111 problems=are.beingg addressed_in a t0PWv manner. Due to the age of the community and the°prevalence of old and degraded pipe sections, some inflow and infiltration (I/1) will continue to enter the City's sewer collection system, which is not adequately sized to accommodate existing 1/1 flow volumes. This results in occasional,short-term sanitary sewer overflows' (SSOs) during peak storm events that exceed system capacities, primarily in the southwestern quadrant of the community. The City lis prioritizing the replacement or sliplining of these degraded lines in order to ensure these I/I problems are being addressed in a timely manner.' The ,City's stormwater system lies within the Petaluma River Watershed, which covers approximately 146 square miles. This watershed is geographically a large bowl bounded by the Sonoma'1VI6untains to .the east and a range of low hills to the. west, all of which drain into; the Petaluma River. Figure 1 is a map of Sonoma County's NPDES Phase II Permit boundary'show;ing' the area surrounding the City' 's watershed, this provides context to the relationship between'the City's boundary, adjacent communities, and the San Francisco Bay. The outer boundaries of the City's stormwater system and facilities are essentially the City's urban growth boundaries, an area of approximately 16.1 square miles. Additionally, many of the areas outside the City are, at least in somefashion, served'by'the City's stormwater program. For example; the unincorporated Penngrove .area, which is to the northeast and immediately "upstream" from the City'in the floodplain, passes stormwater runoff directly into the City's stormwater facilities.' ' Several,classes of rehabilitation techniques,could be used, most notably sliplining and cured -in -place pipe (CIPP) lining. ' This is confirmed by the rain gage,the.City has established and now maintains in Penngrove. 07685 , 5'3's8-028 3 "lull' �%s I to ri) 11a t crWl. f0gr.1 it I i lint Ilig 7, . . . . . . . . . . .aM y . K-, C 0 TA S T• 77, X;o 'L.egen& Parcels PemW Res M Figure 1 Figure I - Area Surrounding the Cfty'v Watershed 3 Source: County ofSonoma; N.P.D.E.S. Phase 11 Annual Report year 7, July 1, 2009'throu,gh June 30, 2010, submitted November 15, 2010. .7685. 150338-028 4 t �e ail.;l�VU dtll tfi�caat rro���'sat�r i'�yal;�:�satf # "UM,ar�� 1 ��I�r�ste�rs. .,. .. i .., . ., �,f. �, N ., .. a�� .. .r.cF nc ✓, a .a ..x ... c•:... r.. a .. .P.fF. .f.� .,.}. ` t There are also several smaller drainage areas inside City limits that cross the City's urban growth boundaries into unincorporated 'areas before returning to the City limits and entering the Petaluma River. The same, circumstances exist for' the Liberty/Marin/Wiggins drainage basin where stormwater flows quickly across and through:agricultural lands to enter the Petaluma River at the northern City limits. As' a result, the City;.s stormwater facilities help reduce flooding in areas west of Petaluma and in Penngrove"by accommodating passage of those flows downstream. Within City boundaries, the City's:major stormwater facilities include the Petaluma River, open creek channels, culverts, buried conduits,'bridge openings, detention ponds; flood terraces, and structures such as transition weirs that direct storm runoff. There are seven major creeks within ,the City (Adobe, Capri, Corona, Kelly, Lynch, 'Thompsxon, and Washington), as well as two engineered channels (North Corona Channel McDowell Creek, -Holm Road Ditch and a Residential area drainage channel with portion of Willow Brook Creek), and a number of retaining walls. smaller' fragmented,, or unnamed swales or channels. The major channels are maintained by the City, Sonorna County Water Agency, or private owners, depending on existing agreements and/or ownership." The stormwater collection facilities are illustrated in Figure 2, which is adapted from the City's General Plan'2025. Key facilities are identified in this figure, including stormwater pumpirig,stations, large -diameter storm drainage pipes -and culverts; and creek channels that are, currently impacted and experiencing flooding during major storm events. 4 City of Petaluma, Annual Report, General. Permit for Discharge of Storm Water from Small Municipal Separate Storm Sewer Systems (MS4's), September 20b9, p. 13. 07685..50338-028. 5.Adapted from Figure 8-1, 100-Year Flood Boundary, frowthe City's General Plan 2025. 6 07685-150338-028 rlv, t rri rRFi'it f(ai+.i"�tasra�i} �'rrir�+,Prs"ii=4 critliii;t(°alt€�ttiii ..�. :: X. ..: .�„'Y. :.:!Ji^: 1�. .. �, _: .F .' "., �:: .. Y.3.R:.Wf f�Y. �.wRrot4..., :':1':C" ..' ',.: .Y+-fS. ;,... .�!'t. .., ,-.,, ., :i1✓„ ..• A - , There are approximately20 miles of open channels and,natural creeks within the City and approximately 70 locations where open channel flows are conveyed underneath roadways by means of bridges or culverts. The Petaluma River flows,through nearly 7 miles of open corridors andl bridges within the City limits.' Many of the City's natural waterways and creek channel banks have been constructed or modified using biotechnical and bioengineered, methods including riprap, flood,walls, concrete lining, open half -culverts, and covered pipe.. Maintaining adequate flow capacities within the channels to provide maximum containment and conveyance of peak storm 'r'unoff"is key to the effectiveness of the City's existing stormwater drainage system. In addition to the open channels,Ahere are approximately.40 miles of storm drainage pipe with diameters ranging from 8 to 80, inches. There are also approximately 3;475storm drain inlets, or catch basins, that funnel stormwater into the City's drainage. system, The drainage system also includes approximately 1.7 miles of roadside ditches, which direct runoff to an open creek or enclosed pipe -system. The City's stormwater collection system has three pumping stations. One of the most critical components of the system is the Wilson Street Pumping Station,which is essentially at the bottom of, the drainage system. This pump station collects stormwater flows from four'36-' inch -diameter pipelines and conveys there from the southern half of "the older eastsid'e neighborhoods'into,the McNear Channel. These flows then run directly into the. Petaluma River. I A The City's.stormwater collection system In 1996, the City determined that overflow has three pumping stations. problems in the, sewer collection, system were primarily due, to limitations; inAhe pumping capacity of the City's wastewater primary influent pump. station (PIPS),"as well as an undersized Lindberg.Lane sewer. main. To help reduce these sewer system overflows, the PIPS was upgraded'; and expanded in 2001 to its current capacity of 36 mgd, and the Lindberg Lane main was replaced in 2002 to'better,handle peak wet weather flows.' 6 More detailed descriptions and inventories of these"facilities, are documented in the City's 2002 environmental study, including TM3 of,the City's General Plan EIR Appendix 7 City of Petaluma, NPDES Permit No. CA0037810, Order No. R2-2011-0003. 0768 5 0 3 3 8 - 0 2 8 7 t:asi �sl`6'rri�saars a:, t�rrxiE4�:it%r 1 tg.•�r �rs� ���s�cliri�;"1°�slac:�ti �r� � ..t• -- •m,-,•�' .�, ,. ., ... .,,, ., � _ � ., .- .. 1. ..- " ';9^r' x,�yw. � ,. "-., .. ..�. �, The City's recently -completed Ellis Creek WRF was designed to provide treatment of wastewater for projected'buildout of the community,, including a reasonable expectation of a portion of stormwater runoff due to I/I. While,PIPS is designed to handle a maximum of 36 mgd during peak flows, the WRF was designed to process 5 mgd on a daily basis for tertiary treatment. However, it was not designed to handle peak wet -weather storm flows when they occur. Rather, peak wet weather flows above the maximum design capacity of the WRF are conveyed to storage ponds for primary treatment, and, then returned to the WRF for treatment at a later time. The recently -completed Ellis Creek Water Recycling Facility conveys peak wet -weather storm flows to storage ponds for later treatment. The WRF also includes approximately 7 acres of enhanced and seasonal wetlands in the treatment process. The gradual movement .of,treated.wastewater and stormwater flows over these wetlands further polishes these flows prior to seasonal discharge into the tidal mudflats and ultimately the Petaluma.River. This process provides an additional water quality benefit to the overall wastewater and stormwater systems and their beneficiaries. The City's General Plan goals,.policies, and -programs address other stormwater management practices with the objective of protecting and recharging the City's groundwater resources. For example, the City's guidelines,for new construction place restrictions on coverage by impervious materials and building footprints, and require on -site percolation ponds and surface drainage swales be considered within areas defined as having groundwater recharge potential. These guidelines: support other policies adopted for the purpose of reducing flooding and promoting groundwater recharge. The City's General' Plan also defines storm drainage standards as follows:" TO -year storm,events — The entire area needs to drain into a pipe or open channel. 25-year storm events — Runoff can pond in streets. 100-year storm events (six inches or more of rain within' 24 hours) —Needs to stay out of habitable areas (structures, residences, etc.). Also, with the goal of reducing water pollution and increasing groundwater recharge, the City's sustainable site planning practices attempt to detain, filter; treat, and reduce runoff to reduce the stormwater-related impacts of new development on wildlife habitat and aquatic species.' " City General Plan, p. 8-15. 9 City General Plan, p. 8-21. i? 07685- 503318-0'128 {'eta t� -ta9 z813i'1 #°�fYt€t1ki:1fE l�i�i� t;7�$9 1 #4iYt1?!1{I,.ea# li&lsll. , Funding for the City's SWP currently includes approximately $820,000 in annual operating and maintenance (O&M) costs paid.by the City's sewer rate payers. The stormwater program covers personnel costs for three full-time equivalent positions, one vacuum truck, limited ongoing maintenance, but virtually no capital improvement costs. The City's recent Water and Wastewater Financial Plan and Rate Study projected annual stormwater-program costs would gradually increase to approximately$915,000'by FY'14-15.10 Since this is merely a projection of current funding levels, it does not reflect an adequate level of storm drainage channels and, creeks or needed capital improvements. However, failure to maintain current hydraulic capacities of the storm drainage facilities will likely result in more:.flooding during peak storm events; higher future maintenance costs, catastrophic capital.replacement costs, and eventually higher Ireatment costs for handling higher I/I levels at the WRF. The City stormwater program,currently funds minimal maintenance activities, such as clearing stormwater collection basins, vegetation,and debris removal from specific drainage culverts, and very limited creek channel maintenance. Other annual maintenance activities are funded with SCWA- managed Zone 2A funding. These activities `include maintenance of creek channels and box culverts covered by an SCWA maintenance easement. The Zone 2A annual budget' typically funds an amount approximately equal to the City's annual SWP budget. Storm drainage control structure in creek channel. City staff has confirmed. that current funding through sewer rates cannot adequately fund' all current. and projected O&M, much less planned capital improvements. As discussed in greater detail in Section' 3, significant additional improvements and maintenance activities, such a creek vegetation management and replacement of stormwater conveyance pipes and culverts, remain unfunded. Unless the sewer utility reallocated.current funds and/ -or, increased sewer rates to provide,more funding for the SWP, the. City will need new revenue sources in order to adequate fund flood protection related costs that minimizes I/I and Sanitary'Se'wer Overflows (SSO's). Additionally, the. City incurs.cleanup°costs related, to. SSO's plus fines.of up to $10,000 per day and $10 per gallon for spills above 1,000 gallon. In 2010, the City reported six SSO's exceeding 1,000 gallons totaling 36,600 gallons, each caused by I/L 11 Except for approximately 500. sewer customers in Penngrove, the City recovers a very limited amount from. properties or' areas outside the City limits. This means that many properties and residents, outside'the City's sewer system boundaries and within the watershed are benefiting from the City's stormwater program but are not paying for it other than the parcel tax paid to SCWA. 10 Water and Wastewater Financial Plan.,and.Rate,Study, Exhibit II-6, page 25, The Reed Group, 10-27-10. "City of'Petaluma, Annual Report of SSO's for 2010, letter to California Regional Water Quality.Control Board, San Francisco, March 29, 2011, 07h85- 50338-028 9 The adequacy and appropriateness of the current funding sources are discussed in,Section 2.3, while potential new funding sources are discussed in Section 4. There are a. number of benefits, associated with the City's SWP and facilities, most of which are discussed in the City's General Plan (Chapter 8). The' primary'benefits include protection of surface and groundwater water quality, groundwater recharge, flood protection, and protection of wildlife and aquatic habitat. These benefits are discussed below, along with their relationship to the City's current stormwater program funding mechanism (sewer rates). The Petaluma River and its tributaries are subjectto.flooding when flows exceed the existing hydraulic capacity of a given channel, which is primarily due to storm events but can also include tidal action (significantly high tides) during peak storm events. Historically, the City has experienced flooding between December and.,March for periods of three to four days, with at least some street flooding, at least once per year.12 Recorded flood damage events have, occurred in 1982, 1983, 1986,1995,1996,1998,..and 2005.. Typically the creek channels tributary to the Petaluma River' begin to rise within hours of a heavy storm event if the soils are already saturated. The City's General Plan concludes that, based on historic records of flooding and studies'by FEMA, "...it is clear that"flooding is a significant problem." Over time, construction.of impervious surface areas such as parking lots,. streets,, and buildings have reduced ,groundwater infiltration and, resulted in.increased surface runoff..As a result, more water is conveyed to the stormwater collection system and the potential.for flooding and flood -related damage's has increased. The 1989 'Federal Emergency Management Agency (FEMA) study noted that,,urban growth has encroached upon many segments of the waterways;.buildings and homes that have been built along.'banks often limit the flood -carrying capacity of these ch'annels.13 Maintaining or improving the hydraulic capacity of these areas will provide better protection and reduce flood - related damages. The flood protection benefits provided by the City's stormwater system accrue to the entire View of the turning basin (Petaluma Slough) looking Northeast community in the sense that street flooding, access to commercial businesses, emergency access, 12 General Plan, page 8-1,4. 13 City of Petaluma Floodplain Management Plan, October 4, 2010, p. 4. i0 C?685 50338-028 i €c i�i f's rP�aaia 4taari�t�:itr i'aaal;s taat'1 ut�a3artt, traffic safety, etc., affect all members of the community. With very few exceptions, all members of the community are sewer system customers. A significant storm'can result in enough I/I entering the City's,sewer system_ that it causes a different type of flooding referred to as sanitary sewer overflows,, or SSOs. In these events, I/I exceeds the capacity of -the sewer system and forces the combined runoff and sewage out of the sewer pipes through manholes and cleanouts. This represents significant sanitation and water quality dangers to the community, and is exacerbated if the hydraulic capacity of stormwater facilities is impaired. As urban and rural development and historic rainfall patterns have increased,14 drainage system capacities have become impaired,.particularly creek channel capacities. The number of SSOs in which runoff overwhelms the,sewer system and,spills out of manholes and/or breaks in sewer system pipes have also increased in volume of discharge, although not in the number of locations. In 2003, the RWQCB adopted. an order requiring the. City to develop and implement a sewer system managementplan aimed at,reducing or eliminating these overflows. From 2005 to 2008, the City reported an average of 11 SSO's per year, ranging from 16 in 2006 to five in,2007. The last two years, the City has,reported six (in 2010),and two (in 2009). The City's mitigation actions in response to the,SSO's include, (1) $400,1000/year in manhole rehabilitation, (2) completion of the C Street Pump Station upgrade design, (3) cleaning of 59 miles of collection system pipeline, and (4) repair/replacement of 14 private sewer. laterals." Although the City's recently completed Ellis Creek WRF was addition, to the designed to process and treat a portion of stormwater flows with t costs,of-sfate'fines for, the community's wastewater prior to recycling or seasonally Y P Y g Y `SSt3.'s,-ie,total sewage ;. discharging these flows to the Petaluma River,.maintenance of treatment costs and stormwater facilities help rninim`ize.these treatment costs. Because sewer;'customer`bills ,. - . . ,.. wodid beti6h6r without .. .; of this, the stormwater system's ability to separately handle the SWp.7., stormwater runoff and reduce the associated I/1 is an important rJ benefit to sewer customers. Therefore, reducing I/I avoids additional capital costs that would otherwise be needed for -„more WRF treatment capacity and. higher WRF O&M costs associated with a larger capacity facility. That is, in addition -to the costs of state fines for SSO's, the total sewage treatment costs and sewer customer bills would be..higher without the SWP. Prior to 1961, the City's primary water supply was local groundwater wells. Although the City now obtains surface water supplies from Sonoma County Water Agency, it also continues to operate and maintain local wells to meet peak demands and emergency water supply needs. t4 Historical rainfall data in excess of 50 years and XP-SWMM model runs used in updating the City's FEMA floodway/floodplain maps demonstrate an increase in rainfall. 15 City of Petaluma, Annual Report of SSO's for 2010, letter to California Regional Water Quality Control Board, San Francisco, March 29, 2011. 07685_ 1'50,138-028 M t £^t'4!�t€ le+ratttr The CIty's M. helpprotecattti �tru *q�;� ata" 3 ears€lrsx l o aiiCttasrti both sur#ace'and"groundwater E.. _sources, by reducing 1111`in-,th.&,, : sewage'cogection system Therefore, it is important1or the SWP to protect the City's groundwater basin in addition to surface water bodies. This stormwater objective directly overlaps with the wastewater utility's_ mandate to protect these,resources. Peak wet weather:flows.can increase I/I and result in SSOs, which aredefined-as any overflow, spill, release, discharge or diversion of untreated or partially treated wastewater from a sanitary sewer system.t6 SSOs can .'be.a significant contamination threat to surface water and/or groundwater. The City's SWP helps protect both surface and groundwater sources by reducing I/I in the sewage collection system.. With regard to surface water quality, the Petaluma River has been identified in the State's Section 303(d) list" as impaired for nutrients, pathogens, sediment, diazinon, and, in tidal portions of the river (only), nickel. The Regional' Water Quality Control Board'(RWQCB) recently added "trash" to the 303(d) list because it was:judged to "cause impairment to the Petaluma River."18 One of the primary objectives of Federal Clean Water Act regulations (including NPDES rules) is to regulate stormwater discharges in order to reduce surface water pollutants and :improve water quality. In compliance,with,these regulations, the City has prepared, obtained approval of, and now operates in compliance with a'Storm. Water Management Plan (SWMP). The "City began implementing its SWMP in 2003. The SWMP includes'the City's commitment to: IP Detection and elimination of illicit discharges; 01 Construction site stormwater runoff controls; and 11 PollutionPrevent'ion for municipal operations. A.funding-related. objective of the City's SWMP is "...the developmenLof a. dedicated funding mechanism" as a necessary par t,of ensuring water quality throughout'the planning'period covered in the City's NPDES permit."Since the City's current stormwater program is partially funded by sewer fees, protecting water quality by reducing pollutants carried in stormwater runoff and reducing I/I related wastewater costs are broader benefits that residents and businesses fund through their sewer charges. o" s Wildlife Habitat,Aquatic Species As, a part of an overall effort to enhance habitat values within the watershed, the City's improvements to; and. proper maintenance of its surface water system helps protect riparian habitats and provide necessary facilities.for preservation,of wildlife, fish and other aquatic species. The watershed includes several endangered, species in the -marsh habitat of the Petaluma watershed, including the California black rail, California clapper rail,, and the Salt Marsh Harvest 16 State Water Resources Control Board,°website(hftp:llwww.waterboards.ca.gov/about_us/perforniahce_reporU plan_assessl12411 _sso_sewage_spills. shtml). 17 Clean,Water Act section identifying impaired water bodies. 18 City of Petaluma, Annual Report, General Permit for Discharger of Storm Water from,Small' Municipal Separate Storm Sewer Systems (MS4's), September2009, p.6. 19 General Plan, page 8-15, 07685-' 50338 02t E'ct.�lif I-.i Sr€nINVA tcr- Il.i ;r aI 1'Uf `v lkiitr�lii .. V Mouse-20 The U.S. Army Corps.of Engineers list Chinook Salmon and,Steelhead'as endangered and the Sacramento splittail as;'a species of concern.21 .2.5, Benefits to ° Agencies Other agencies with regulatory or jurisdictional .responsibilities in the' watershed incur many of the same stormwater"progr,am,benefits as City residents. These:agencies also actively cooperate and participate in both stormwater program capital improvements and operations. These agencies include the County of Sonoma,, SCWA, and the Southern Sonoma County Resource Conservation District (RCD); a'local component of the U.S. Department of Agriculture. SCWA and RCD involvement are summarized below. i SCWA shares responsibility for maintenance of open channels; within the City and was involved in developing the Petaluma River Watershed Master Drainage Plan; which was last updated in June 2003.`This master plan provides guidance for development of channel improvements, Petaluma River and tributary setbacks, and the design and construction of flood terraces to provide passage of -large storm events. The RCD developed the.Petal'uma Watershed Enhancement Plan, and has funded projects that provide watershed enhancement, improve groundwater recharge,,and conserve and enhance existing wildlife habitat. Although not an agency, Petaluma Basin Zone 2A consists of the Petaluma River watershed within Sonoma County Supervisorial District #2 that drains irito the Petaluma River, as shown in Figure 3. It operates -under the authority, of! Sonoma County Water Agency and is a means of financing the construction and maintenance of flood protection works within this'watershed.22 The City is currently working with these agencies and various: community, groups to support creek clean-up programs and promote opportunitiesto engage the public ;in -implementing the SWMP.23 Since these agencies share in bath the benefits of the City's stormwater program and the responsibility for stormwater drainage and flooding components in the -larger watershed, they could be considered as potential sources or partners for future funding of the maintenance and construction of needed SWP capital improvements, as discussed.in Section 3. 20 Appendix G, Marsh/Bay Habitat -in the Petaluma River Watershed, Southern Sonoma County Resource Conservation District, Petaluma River Watershed Enhancement Plan; April 1998; p.,1. 21 USACE, Threatened, Endangered, and'Sensitive,Species Proteciion and Management System, (hftp://el.erdc.usace.ar,my.mil/tessp/project.cfm?ld=435) 22 Source: Sonoma County Water,Agency website (f ftp:/Avww.scwa.ca.govlflood-protection-zones/). 23 City of Petaluma, Annual'Report, General Permit for Discharger of Storm Water from Small Municipal Separate Storm Sewer Systems (MS4's), September 2009, p.T 07685—,50338-028 .3 Ilia. n1 zvat M, tt'p-0— .Z tYi .......... ... .. IA ... zi . .......... ........... . ....... ..... .. ... rq 3 A re 7,7 ON p t is RIM Ar V. NA IT ......... . .... t2 '9A Mad" "t 'Odfitv Ilk 44� 41 "p l—I �ON E ................ Figure 3 — Map of Petaluma Basin Zone 2A . ... . . ..... atS aifil sr r iit99 wrar�it it+,rfil' r ;tr3rt 4 UIza$taa '1 valkiaiii"I R _ _... „ 2.3 Current'Program Funding Mechanisms Currently the,'Ciiy pro'Vi,des . Current Fund ounce. appraX jnately,$820,00' per' .. year for the stormwater' The City's current'SWP funding consists of two parts: (1)• annual program; which, represents' approxrmately, 0 of the operating and maintenance, (O&M)costs, and (2) capital rrionthly,sewexbrlls paid by,, improvement costs. O&M activities are by definition intended current.sewer system too operate and maintain existing facilities whereas capital p g pal costs ,rysers.' Tliese,fii`nds are :,;-:,.,tom ., .. . ' used, almost a rclusiVely'for , include design and.construction of new or expansion of'existing' pg�;eosts facilities. Capital costs also typically include renewal or \. . replacement of major facilities. Currently the City provides approximately $820,000 per year for the stormwater program, which represents approximately 2% of the monthly sewer bills paid by current sewer system customers. These funds are used almost exclusively for O&M costs. In the past, the City has received assistance in"funding SWP capital improvements from Sonoma County Water Agency,,. Zone 2A, and the RCD. The City has also received approximately $3 million in grant funding from°the State Department of Water Resources (DWR) for land acquisition, flood terrace construction, and stream habitat restoration. The grants included $850,000 in 2010 for'land acquisition of floodway and floodplain designated properties in the Denman Reach of the Petaluma River .24 However, stormwater capital improvement' costs are not currently included'in the City's sewer rates or wastewater utility financial plans. This lack of a systematic, long term source,of capital funding severely limits the improvements the City can make and leaves most planned'or desired improvements unfunded until a grant or other assistance is obtained from, an outside source. r The City's current sewer rate structure is based on cost -of -service principles intended to equitably allocate wastewater utility costs,including annual stormwater program costs, to and within customer classes. The. City prepared a full cost -of -service analyssof'sewer rates in the fall of 2010, which included the storm watercomponent. The new.five-year, rate' -structure recommended in that study is now being,considered through the public review process, including the Prop 218 liall'oting process. The recommended increase of 9% for Year Yof'the Draft Rate Study was implemented, effective January 1, 2011, and was 4% lower than the previously adopted" 13% rate increase. Sewer rates consist of fixed monthly charges based on customer class and/or meter size, plus volumetric'and strength charges. Volumetric charges are based on average winter consumption for single-family residential customers and monthly water usage for other customers. Strength charges are assessed to some large industrial customers' whose wastewater is sampled and tested; these test results serve as the basis for their "strength" charges. Fixed monthly charges are, intended to reflect costs that typically do not vary with the amount of wastewater handled by the City's treatment facilities, such as debt service, personnel, and 24 California Regional Water Quality Control Board, Executive Officer's' Report, October 6, 2010, PA. -07685-' 50338-c18 L r $try 1 i rarltrit, } VJ UJit<jr u .- administrative and overhead costs. In contrast, volumetric and strength, charges are intended to reflect variable costs, which typically change with the amount and strength of wastewater and/or number of customers in the, system, such as` pumping costs and chemicals.. Based on these concepts,.SWP costs could be included as part of both fixed and variable charges (e.g., some costs could be attributed to stormwater-related 1/1 pumping costs). The residential rates that have been. implemented, are shown in Table 1. Table,l _ .. Current-PetalUlrna a ;t:„Rates' MUltkUnW,Re�s M Un fete"reds ;G :a z,- I ViY$T 45 Sewer customer classes;iriclude single- and multi -family; residential, non-residential with low-, medium-, and high strength wastewater, and larger metered industrial customers., Single-family residential customers pay, a fixed monthly service charge of $17.22, plus a $7.45per hundred cubic feet (hcf), variable charge; based on the average -winter water consumption. Typical single-family winter water consumption is.6 hcf/month, resulting in a. typical monthly bill of $61.94.21 The City's utility rate, studies undertaken since the passage of Prop 218 have included the stormwater component.in the wastewater rates; ,public input has been solicited through the Prop 218 noticing, public"hearing, and adoption process. The methodology and justification for using the City's sewer rates to fund storm -Water "program costs are discussedin Section 3. 25 Proposed': Wastewater Rates (2011), Water and Wastewater, Financial Plan and Rate Study;,Exhibit IV-7, page 54, The Reed Group, 10-27-10. i h 07685-' 50338-0128 Ciitifii ' t, Ielf i6L t PLANNED IMPROVEMENTS *R. Although briefly mentioned in previous sections, the City's SWP deficiencies and planned capital improvements are discussed in more detail below, and underline the need for additional revenues for both one-time capital'projects,as well as ongoing maintenance activities. 3.1 System De€icien'cies Up until 1987, the SCWA provided maintenance of stream and creek channels within their jurisdictional authority by reducing:overgrown vegetation in order to maintain runoff capacities. Unfortunately, Sonoma County Water Agency discontinued this practice atthat time at the request of the California Department-of.Fish and Game. Maintenance of "individual creek segments is now conducted only in response to a request or emergency call. Thus, the.hydraulic capacities of these facilities have decreased as vegetation and debris.continue to accumulate within channels and culverts, thereby -increasing potential flooding problems. Additionally, obtaining the necessary regulatory permits for channel work has added time and expense to these activities, thereby reducing the frequency and amount of maintenance possible. As a result, the primary deficiency in the City's stormwater system is the declining hydraulic carrying capacity of the SWP's creek channels to adequately handle the runoff from large storm events: The primary areas currently experiencing these types,of.flooding problems include: The Corona Reach (Lynch Creek`. confluence upstream. to Corona Road). EM Denman Reach --Corona Road"to Rainsville Road, which includes unincorporated areas,in the County. a Areas below the Willow Brook Creek confluence with the Petaluma River. Im Willow Brook (downstream of Ely Road). Areas adjacent to the Marin and Liberty Creek confluences.(located in unincorporated County). Kelly Creek culvert at Sunnyslope Avenue. In addition to the open channel hydraulic deficiencies noted above, many of the City's west - side drainage channels, pipes, and similar facilities are past their useful -lives and are in need of repair. Example of vegetation overgrowth in a creek channel. Finally, the City's two pumps at the Wilson Street Pump Station have exceeded their useful life and should be replaced to maintain hydraulic capacity and increase system reliability. 07h85 5G::i 8 - 0 2 8 7 11,1 r csrl:viva r'4trtrtti's'.atcrw it rqa 1 tara�lri�'l eatr;gta+its Maintaining and/or improving the capacity of the numerous creek channels, collection basins, pipes, culverts, bridges, and open channels is and: will.eontinue'to.be a major focus for the City's stormwater system. The City's River Access and Enhancement Plan and the General Plan 2025 outline key improvements needed to maximize the hydraulic carrying capacity of the stream and creek channels, including creating flood -terraces and low -'flow channels, habitat restoration, and managing and controlling stream bank vegetation. These activities„ and improvements reduce the buildup of channel debris, improve channel flows, and provide ongoing benefits to the City's sewer customers by further reducing I/I flows currently processed at the Ellis Creek WRF. The Sonoma County General Plan, summarized the City's flood related needs as follows: "The City has idenfified'the need to preserve and enhance the natural flood detention capacity, particularly along the headwaters of the Petaluma.River outside the City limits, as a key element of redducing flood'hazards in the City."" 3. i s tendon Facility There is a regional detention facility sited at the confluence.. of Willow Brook and Lichau Creeks, which is defined in the Petaluma River Watershed M'a'ster Drainage Plan. Increased rainfall and development in the Penngrove area;has resulted in' increased runoff flows, which have increased flood conditions, downstream of Penngrove. The historic capacities of the urban creek corridors and piped' systems' within, Petaluma are not -adequate to handle the increased flows now entering the City at the two major creek confluertceswith%the Petaluma River-. Funding for the regional detention facility is not yet in place. The City is in the final stages ofAhe '$40 million Payran Flood Control Project'in partnership, with the U.S. Army Corps of,Erigineers.' Pending the City obtaining funding for this final phase,the project anticipates a'two-year completion timeframe. Once completed, this improvement will effectively eliminate the repetitive loss zone within thePayran reach.21 Major development proposals such as Sonoma Mountain Village in Rohnert Park and Redwood Shopping Center at the intersection of Old Redwood Highway, and North McDowell Boulevard have incorporated smaller. detention facilities into their master plans to address project specific impacts to downstream capacities. Project and site -specific mitigations help reduce off -site stormwater flows that would otherwise add to the requirements of downstream system -wide improvements. N Sonoma County, General Plan — Public Safety Element, September 23, 2008, P. PS-8. 27 City of Petaluma Floodplain Management Plan, October 4, 2010, p. 4. 18 07685-150338- 028 n i �, 4Y}' Ct§ ��CT I�Ydl32:€�.,�$iYl"'J79'at,lft � �i3p;1 t334 � E3#il9BYS�'�`.:4�iV1«s�t,8Ci9#� .:*,�,, ax�::e�,�.,x— ^.r,� �-a�;:.-xs:. -�». •. 3.2.5 Pfaintain-Hydraulic Capacities The City's stormwater master plans have. also recognized the need for. two types of activities: (1) providing vegetation maintenance and/or habitat restoration to improve. channel carrying capacity, and (2) constructing flood terraces in the most critically :impacted, creek channels. In 2005, the City completed the first phase of a stream channel improvement project in the Denman Reach that both removed non-native vegetation above the low -flow channel and created a flood terracing area of approximately 1,400 linear.4eet of river frontage. However, City staff estimate there are approximately 20 mileS21 of additional stream channel that must be maintained and/or may need vegetation control. To illustrate the longer -range needs, if the City was able to restore channel carrying; capacity of an average of 5,000 to 6,0001inear feet per year, it would take approximately 20 years to make improvements4o the open drainage„channel's within the City.29 Given the cost of`the rrequired restoration work, and accompanying.mitigation measures, it is infeasible to! achieve this without significant additional funding sources. Based on the City's,exisfing'Storm Water Master Plan, Petaluma Watershed Enhancement,Plan, and Sonoma County Water Agency's2003 Petaluma Denman reach stream terracing and River Watershed' Master Drainage Plan, the City channel improvement project has identified at least $1.5 million of.immediately needed improvements, to maintain hydraulic ,capacities in the system, including: Pump Station Improvements (specifically replacing the pumps at Wilson Avenue Pump Station) Repair other stormwater pumpstations (including wet -well maintenance and pump repair) Repair of.culverts in various creek channels (e.g., the Kelly Creek culverts) These are "planned"' in the sense that the City and other agencies .recognize the .need, for, these improvements in order to maintain at least the system's current stormwater handling capacities., These improvements are routinely evaluated within a system that ensures they, are amortized over " their useful. life. However, the City is currently only able to fund improvements on an as -funding - is -available basis rather than an as -needed basis. In light of current funding deficiencies, these improvements will require significant additional funding sources. 28 City of Petaluma, Remleh Scherzinger, April 21, 2011. 29 That is, 22 miles is 1.16,000 linear,feet; divided by 20 years equals 5,800:linear feet,per_year. ..... <... , . .. .... ,,., -.ram ...n;,,,,,...., .:.:.. 0.,768 50338-.i28 9 r "'Funding Mechanisms" can.include a wide variety of revenue sources -to pay for capital improvements and/or operating and maintenance costs.. Table 2 summarizes, some of the broader funding mechanisms typically applied to stormwater programs, categorized by best management practices (BMPs).31 r ka v w.'u3.%a¢ <: •�ET"' eWb "r',` 36 ' �-...e;,.aa?&ssFt »- ' 1. WatershedPlanning, ` � ;Property Taxes � stormwater User Charges 2 Source Controls' Viay�a wd" �, s �aT .,'', :... Enforce Ordinances�M�w General Fund Revenues 1�fi' Stormwater lYJser;*Char es� - t . A ate,. ... _ h w g;, as. ' Jn -„ :E,. i s•3--Uy �, �,,,�.y, � p g'x Plan Review�and�InspectionFeesEys ; d Develo menfRe ulationss., r 3 Maintenance Activities `'General„Revenues Stormwater User Charges a Landscape Assessment_ Districts 4 Capifal Improvements 'rt •1 Kwd � -�5�� Md�r New pevelopinent� Developer Exactions Retrofit ExistingAreas k,; `.p Bonclsl=1 "' eJ x , Sihkin g "A Funds, , 1 General Re enW2S Stormwater User Charges p�'{ :rLandscape Assessment`Distncts;or Benefit Assessment Distracts Since this evaluation specifically addresses stormwater rates, this report focuses on stormwater- rel'ated;-rate-making principles (as opposed to wastewater rate principles). These principles include,, (1),general'tate settingcriteria, ,(2) more specific cost -of -service rate -setting -principles, and (3) Prop, 218 requirements. ,These three categories are discussed below. While local agency policies have an important role in establishing a stormwater rate methodology, several.broader rate -setting criteria are typically addressed, including: 91 Meeting Annual Revenue Requirements 30 Lindsey and Doll, Financing Retrofit Projects: The Role of Stormwater Utilities, from the proceedings of the.EPA National Conference on Retrofit Opportunities for Water Resource Protection in Environments, Chicago, Illinois, Feb. 9-12, 1998. t) 07685- 50338 Ci2 8 :4", 14) I'ia Providing Revenue Stability Adequately Funding Repair, Replacement and. Future Capital Improvement Costs Establishing Rates that are Fair and Equitable and'Easy'for Customers to Understand 3 Maintaining'the Financial Health of the Agency (including sufficient reserves, meetingdebt service coverage ratios, and observing appropriate financial management policies) . 1.2 Industry- Wide Rate Fundamentals The industry -wide fundamentals of rate setting methodologies are generally credited to James C. Bonbright in the Principles of Public Utility gates," but are also reflected in the Principles of Water Rates, Fees, and Charges; 2 publishe'd bythe American Water Works Association (AWWA). This AWWA publication is' considered by many to be the most widely used standard for rate setting today,. Both these documents outline pricing policies, theories, and economicconcepts along with various criteria for selecting azate structure. A simplified list of the attributes that should ,be considered in selecting a'sound rate structure includes: Rates should be easy to understand from the customer's perspective Rates should be easy to administer from the utility's perspective Rates should promote the efficient allocation of the resource Rates should be equitable and non -discriminating (i.e., cost based) IM There should, be continuity in the rate making philosophy over time 13 Other utility policies should. be considered (e:g., encouraging conservation, economic development, etc.) © Rates should consider the customer's ability to pay Rates should provide revenue stability from month to month and year to year These- principles define the, parameters within which rates should be developed, but they also suggest that there is significant latitude for local agencies to adopt a variety of rate structures. 4. 1: 3 Rate Setting and Cost -of -Service vice Principles The process of setting rates and developing,a sound rate ,structure should strive to incorporate the industry standard cost -of -service principles included; in the Bonbright and AWWA publications noted above. However, many rate economists and regulatory agencies be that cost -based attributes should be of primary importance in guiding utilities on rate structure and rate policy 31 James C: Bonbright; Albert L. Danielsen and David R. Kamerschen, Principles of Public Utility Rates, (Arlington, VA: Public Utilities Report, Inc., Second Edition, 1988), p. 383-384. 32 American Water Works Association; Principles of Water Rates, Fees, and Charges, Manual of Water Supply Practices, Manual M1 (Fifth Edition, 2000). 07685-3503318-028 2 Y��� "�,_, "-�•:,,,., {;:ici �,,i J'tr alifa�y r_4ti3rsix��:�ter i�rg3.... r trna:�f'caa�a$asi��i=�:.z6�€eta=ara issues. This is because cost -based attributes address the fundamental cost allocation methodologies that lie at the heart of equity and fairness in rates. Cost of -service rate studies typically address boththe magnitude of funding and the rate structure:design. In other Gost:of.-seririce rate studies;,;;,:. words, the arnount;of revenue collected (e-.g., $10 million per typjcalfy ,address both -the :magnrfuder;of fieridrng anal the. year) and the way in which the revenue is collected from the - rate strvcture.:desig"n. important. customers are equally , ortant. p J A rational nexus between the charges paid Land the benefits. received by rate payers is an over- arching requirement of rate setting methodologies. To illustrate this point, assume that a rate structure and/or the specific cost allocation methodology were, to be challenged in court and brought before a judge..The explanation of the cost -allocation methodology should be sufficient to persuade a judge that there is a "reasonable" nexus between the rates customers pay and the benefits those, customers receive. Therefore, while there is no single rate methodology or rate structure -mandated for stormwater program funding the "'most accurate" rate methodology is not required in every case, and no single rate structure should be applied in every case.. This is true even, though another methodology may be more equitable, more accurate in determining the°cost-causation attributes of individual customers, or may be more appropriate in some cases. But what is ultimately required is that the methodology demonstrates a reasonable relationship between benefits received and the charges collected from stormwater ratepayers. Under California law, Proposition 21833 treats stormwater'rates in, the'same. manner as water and sewer rates. It imposes a, number. of additional requirements related to how stormwater rates are developed and adopted, including requirements for: (1) equity between customer classes, which is typically determined through a:cost-of-service analysis and excludes subsidies of any,customers at the expense of other customers;; and'(2) public noticing, a protest -ballot -process, and public hearings in order to adoptand�implement the rates. The first set of requirements, is, basically consistent with the cost -.of -service rate setting, principles discussed, Above; The second set of requirements applies to the actual adoption process,. which does.not,necessarily impact the funding mechanism itself. 4.2 Alternative- Stormwater Funding 'Mechanisms HDR reviewed a wide range of funding mechanisms used by both stormwater and other types of utilities responsible for stormwater programs. The review included agencies in California and across the nation. It indicated that. there is no single, universally accepted "best" funding mechanism, although some.may be more equitable than others or provide other advantages such 33 Called the "Right to Vote on Taxes Act," Proposition 218 adds articles XIIIC and XIIIDto the'California Constitution. 2.2_ 07685 .50338-028 �ifA U4311 'i%aP txtb 1i48,1$$y3 ii�a S LSs ib S� L'El1i 2i8{1p1 kge, rv. -.i ...:,,, ., .. ".J:J ..la-.'r.a', .+,.✓. 0. ., ,n1.s:'i ::""-+1.--. ,r'ne �v. i..- v, ',... a... .. ... .. ,,x,.,,, ,, .. ..Y-',,, . .:.ui .... .. - as being easy to administers simple=to understand,and/or broadly accepted -in the community. For example, historical �r ew Indicated (7'hIs revi ) ' that methods that have been used to fund stormwater program there Is nasingle;`-universally: costs include: , .° acre ted:"best.'"' ftindin P 9 hechanisrn although some , Sewer hales: Asa part of protecting, surface and be more equitable: than groundwater quality, stormwater facilities prevent others::.". g q Y, p overtaxing of sewer capacities,'which can endanger these resources. This is particularly true for combined sewer-stormwater systems. a Waler Rates: As a function of providing sources of safe drinking. water, including surface and groundwater, water rates can bejustified in funding stormwater programs when they protect, enhance, and/or help recharge these water supplies. 13 Solid Waste bates: Clearing, of "trash" from stormwater collection basins keeps both trash and related pollutants out of the drainage system, thereby protecting water quality and preventing flooding that may occur when debris clogs collection basins. ® Street Sweeping Charges: Although it is uncommon to fund stormwater program costs entirely through street sweeping charges, debris and pollutants that accumulate in streets can directly contribute to contamination of surface and groundwater when debris and/or contaminants are carried by storm,runoff into stormwater basins and ultimately into surface waters and/or groundwater recharge areas. Cleaning streets and stormwater collection basins reduces4ocal flooding; and.these'types of stormwater program functions have been funded through street sweeping charges., Stormwater. Utility Charges: Historically, the number of stormwater utilities has been very limited. Currently there are roughly 1.,000 stormwater utilities operating in the U.S. However, they are becoming'more common as municipalities.are faced with constructing and operating stormwater improvements to meet NPDES, Clean Water, and state/regional water quality board requirements. Communities. with dedicated stormwater utilities typically develop separate stormwater charges, which are most commonly based on impervious surface area, and may includeslope/runoff, coefficients or related factors intended to quantify contributions of individual parcels to storm -related runoff. 4,2.2 Discussion of Industry Standards for P"1rnding too t-r PrOgraMS This section reviews industry standards and various funding -mechanisms and methodologies used by other municipal utilities to fund stormwater costs. Two industry surveyss of stormwater'funding mechanisms are summarized in the following subsections, followed.b,yseveral case studies of stormwater rates from other cities. These summaries indicate that a wide variety of stormwater rate structures are used in California and the U.S., and that no particular methodology can guarantee legal defensibility; however, some methodologies may be looked"upon more favorably by the courts. Regardless of the methodology used, there still.must be a reasonable relationship, or nexus, between the costs paid by the beneficiaries and the level of benefits they receive. 07685-'50338-028 23 �,, ,,i iiTT ilt3�s�a.s';�tc�rszi��axrr f'rtyl,r'arrt f i`s€as.lirst,}�•��.i9�r.lti��rx •6 A„ F„ ..•gar,. �,�`, kar ?,A nSG o� P .,8 x"". A 2010 stormwater utility'surve_y. by Western Kentucky University (WKU)34 confirmed a total of 1,112 existing stormwater utilities in the U.S., but, estimates there maybe as ;many as 1,500. The average population served by the confirmed stormwater utilities is'82,000. This survey focused on legal challenges to stormwater rates, and found a tonal of 29 cases. Of those 29 cases, 21 were upheld, five cases resulted in rate structures that were struck down, and .three cases are still pending. The 21' cases upheld -included 14 with stormwater rates based on equivalent residential units (ERU's). The WKU survey, was somewhat inconclusive "regarding the reasons for the striking down of rate structures in the five cases that were struck down;.two were based on ERU's, one used parcel size, one used impervious surface area, and the basis for one was unknown.31 Overall, 572 communities used ERU'.s for their rates, with average and median ERU`s of 3,000 and 2,700 square feet, respectively. The average single-family monthly fees were $4.12, with a median fee of $3.50. The author of the survey also'offered two key opinions about stormwater rates: Best Way to-l!€.xtermine Ston-awater l,ees: The community',s legitimate stormwater needs should be identified and the fees,set accordingly; If ,the stormwater' needs are flooding and water quality, then legitimate uses of those funds should include design and construction of water quality and flood -prevention capital improvements; stormwater facilities maintenance, staff salaries, education and outreach, and administrative costs. ERU: s as the Basis for'.Fees: Equivalent residential units are the most direct method of calculating stormwater fees, and it is important that an accurate estimate of an ERU is developed: If the ERU (e.g:, in square.feet of impervious area) is,under-estimated, single-family residential customers will pay less than their fair share; if the ERU is over estimated, non- residential customers will' p# less`than their fair share. A modified ERU system based on "tiers ' of impervious surface area is also commonly used. This approach is -simpler because iticategorizes customers into groups (or tiers) covering ranges of impervious square footage. This av bids, making square -footage calculations for each parcel, and individual fees ;for every customer. 4. 2,2, 2 Black.& Veatch conducts an annual survey of stormwater funding mechanisms that, in 2009, received responses back from 70'utili'ties„covering 20 states," Some of the key findings,from this survey are: fB The basis'for user fees was 55% impervious surface area, 7% gross area with a development intensity factor,.3% gross area with -a runoff factor, 29% gross area with both a development factor and runoff factor, and 6% other. 34 Western Kentucky, University, Stormwater Utility Survey 2010, C. Warren Campbell. 35 This study actually iridicated the basis for rates of two cases were unknown, but one of the unknowns was the City of Salinas which, as discussed below, confirms the City used;,an,impervious surface area methodology. 36;2010 Stormwater Utility Survey, Sponsored and administered by B&V Management Consulting. 2-: 07685-i 503 3 8 028 4 • �, .... 1. .x�a.. ♦'�.1 :p... .� K . . .....>. n,.. '.�:�..�a.,,, i s. ... .,r ,w ..„#+�-.. ..Y ,u.s n.i�R+:.`n rr.t'.�vt,.c �.4H�.,u�,}:`f .. ... ' The stormwater coritarninants of greatest concern,,are: sediments (88%), nutrients (71%), pesticides (52,%), oil and grease (52%), heavy metals (45%), and other (32%).37 LE 93% of respondents said the stormwater fees were the same for all service areas or watersheds, while 7% were not. 0 80% of respondents collected most (90% or more) of their revenue from stormwater user fees, while 20% have multiple sources. 0 50% of the respondents were separate stormwater utilities' 30% were combined with a public works department, 11% were combined witha wastewater utility, and 9 % were other structures. ® 81% of respondents served a city rather than county or region. Utilities using an ERU basishad an average ERU of 7,253 square feet, while utilities using impervious surface area had an average ERU of 2,453 square feet. 75% of respondents indicate stormwater fees are included in water or other utility bills, 21% are included with property tax bills, 7% send special bills, and 3% use other means. Several case studies of stormwater hates are discussed below. f The City formed a stormwater utility in 1996 to protect and improve the water quality in local creeks. Stormwater fees are based, on amount of impervious f area, with residential' parcels "grouped" by size ratfier1han - separate calculations for each,parcel. The program provides (Santa Rosa's) stormat& funding for creek restoration, street sweeping, public fees are based on amount of,. imperveaus area, with education, and stormwater ualit and'.drainage projects. residential parcels `,grouped:'..' q Y Total annual funding for stormwater activities was by size; rather.than separate. . approximately $2.2 million in.2007-08. This translated to an f `f calculations for each parcel annual stormwater rate of about $27 per household and an average across all parcels of $39 per year. The City collects stor-mwater'fees through county property tax bill08 Santa Rosa's and'Petaluma's annual stormwater budgets are roughly equivalent when compared on a per population basis. That is; Santa Rosa's.2010 population39 is 2;9 times larger than Petaluma's, so Petaluma's annual stormwater, budget of $.820,000'tiines this population factor of 2.9 is $2.3 million (close to Santa Rosa's budget)..A separate stormwater utility serving Petaluma properties might be close, to Santa Rosa's current fees of$27/household at current funding levels. 37 Respondents were allowed to select multiple contaminants, so percentages total more than 100%. 38'City of Santa Rosa, 'Storm`Water and Creeks, Summer 2008', www.srcity.org/stormwaterandcreeks. Also, phone conversation with the Santa Rosa Stormwater Utility, (Steve Brady, 3,A4-11). 39 According''to the 201 TCensus, Santa Rosa's population is 167,815, which is approximately 2.9 times Petaluma's population of 57,941. Source: California Department of Finance, Demographic Research Unit. 0 7 6 8 5 - 1 5 0 3 3 8 - 0 2 8 2 i g y gg .w, - '��t'.6#t B;B'K'I i1i11Ti 4',�3$€?l"%11'kt itc.C' ��8Yi3 T.33'/£;Y't3ikttiBB 1 4.#pE14tBaB . The City had been using a. flat rate stormwater fee of $1.97/month for every sewer account, regardless of customer class or property characteristics. While this provided a very simple charge, many impervious' areas such'as parking lots without a sewer account were not charged a fee. When the City needed to increase fees, they felt they had to make a compelling case to the public that the fees were equitable in order to passAhe;Prop 218 ballot process. However, the City's existing "flat, -rates" were` determined to be inequitable since they did not account for varying combinations of pollutant and,runoff'loads. The City's primary message to property owners was twofold: (1) that new rates,, reflect both runoff and pollutant loads tied to impervious surface area and are equitable and, (2) the stormwater system protects property from flooding and protects waterways from pollution. Once all°parcels (not just sewer customers) were included in the rate analysis, single-family residential customers' bills actually went down by 10% due to the non- residential properties added 16ihe mix.41 ^�, .,, ,, i.o ..,. '.� ✓f "w�€� � .`!3 fin!/ .:✓,'!'�8'�; The City, which has separate stormwate,r and sewer collection systems, was sued by the Howard Jarvis Taxpayers,Association over whether the fees were subject to Prop 218 requirements. The City had applied these rates to "users of the stormwater drainage system" and to every developed parcel, with.feescalculated based'on.impervious surface area. Undeveloped parcels were not subject'to the rates. The 2002 decision held that the fees were subject to„,Prop 218 but did not find fault with the impervioussurface area method used to calculate the fees.41 The County uses impervious surface area and ERU's to determine: stormwater fees and has a flat rate of $5.84/month for single-family homes, with -condos set at 60% of the single-family rate and non-residential rates based on theirsquarefootage of impervioussurface area. In June. of 2010, the City adopted,a flat -rate combined sewer/ stormwater rate structure. Single- family rates were $200/year ($16:67/mo). The City's rate ordinance rioted that 5.5% of the rates are apportioned to storm seweruse, maintenance, replacement and improvements.41 Portland's Environmental Services Department provides,residents.and businesses with wastewater and stormwater collection.and treatment, sewer installation and maintenance,, drainage services, and watershed restoration. Since 1977 Portland has charged a separate stormwater utility fee to help pay for stormwater' management costs. 40 Kenneth Spray and Grant Hoag, "Stormwater Program Funding in California," APWA Reporter, Dec. 2003/Jan'. 2004, pp.25-27. 41 Westlaw, 2002 Daily Journal, D.XR. 6,161, Howard. Jarvis Taxpayers Association, et. at., Plaintiffs and Appellants, v. City of Salinas, et. al., Defendants and Respondents. Note:;this.Case was prior to the.Bighorn-Desert View Water Agency decision in July of 2006, which further settled the application,of Prop"218'to utility rates. 42 City of Bakersfield, California, "A Resolution Establishing Sewer and Storm Sewer Service User Charges", adopted June 9, 2010. 26 07685 ' 50 3'38. G,28 t rt ,7�i 1'c tala �s *�St�=rstiWaIk t !'rYjg 61I I: i T1, < lay aa�aisa ,�.• In 2000, the City.re-evaluated stormwater rate alternatives and determined that 70% of the stormwater management costs should be allocated to public transportation rights -of -way (streets and roads), 23% to property runoff, and 7% to environmental protection and restoration. One of the key principles and -assumptions in their evaluation was that :all properties and ratepayers are responsible for transportation and environmental components of the stormwater utility. In 2006 City Council established a reward system for ratepayers who keep stormwater from leaving their property, offering residential ratepayers up to a 30-percent discount for managing runoff from their roof areas. Commercial customers get discounts for managing runoff from both roof and paved areas. Credits are also 6ffered'for having a small impervious footprint (less than 1,000 square feet), creating or maintaining tree coverage, disconnecting downspouts, installing rain gardens or 'drywells, and other low impact development BMPs. The City's current monthly stormwater rate is $8.25 per 1,000 square feet of impervious surface area, which are divided into on -site costs (35%) and off -site costs (65%). Ratepayers who manage stormwater on their property can receive up to a 100% discount of their on -site charge.43 All parcels in the City are subject to a stormwater utility charge, regardless of whether a stormwater system.from the parcel is physically connected to the .City's,public drainage system. The City states that drainage from most, properties enters or impacts the City stormwater system in some manner. These fees are", used, for many purposes that benefit all City residents and property owners. In.2002, the City, budget allocated stormwater fees for capital improvements and debt service (33.3%), operations and maintenance (31'5%), engineering (17.2%), shop maintenance (10.6%), and miscellaneous overhead (7.36/o).44 In 2010, the City of Kitchener implemented,a "tiered flat fee" stormwater rate structure based on impervious surface area. The key characteristic of this rate structure is that it shifted the overall stormwater program costs from residential to non-residential properties,including both taxable and non-taxable' entities.41 As these examples' illustrate, various cities and stormwater utilities use a wide variety of funding mechanisms to pay for stormwater system. costs. The next section discusses potential funding alternatives the',City could consider, as well asoptions for how new funding sources could be collected from beneficiaries. 43 Source: City of Portland website (hftp:llwww:portland6nline.com/) 44 City of Issaquah, Washington; Stormwater Rates, from the City's website, 1/21/11. 45 APWA, Sustainability in Public Works Conference, 'The More You Pave... The More You Pay ... A Canadian Perspective on Stormwater Rate Setting in Kitchener, Ontario, 1127111. ,nil 0 6 8 5 - 5 0 3 3 8 - 0 2 8 27 U I I- C I i19b#i# V:k!l nc M9 4Iatttqt 4.2.4 Alternative S-for mwazter;Fu,thin g Mechanisms When an agency is considering, developing either a new funding mechanism and/or a separate utility, the technical; factors. andliate methodologies, are secondary to several other key considerations, including.- 0 Is the funding method politically acceptable? IS Is it equitable in the publi"Cs eyes (the benefits accruing to those paying the fees)? M Is it feasible to implement? IM Is it reasonably easy to,admin,ister? 13 Is it legally defensible? 13' Can it 9. enerate:enoLigh':revend& to,sufficiently fund the capital improvement and O&M costs as.dc5termined by the responsible agency and decision -makers? U WilLit provide a dedicated source of revenue or will other agencies"and services be competing for the same, furfds?46 More,and more cities across the U.S..are creating a separate stormwater utility as a means of better managing -their,'increasin""g stotmWdt6r1'O&M andxa'i al,improvernent costs. Escalating regulatory p _t pressures -and costs, such as those'related to NPIDES permit -requirements, have been a primary factor behind this, trend. stomwater parate stormwater utility more clearly separates -N operations and -capital, costs1rom those of, I.;,w6re-ana, more, cares across the. other utility services (e.g., sewer, water, street'swee ping, U S. are creat�rrga separate solid waste). lh the City's,6se this alternative should be 4 stormwater udlity ag'a:meani of.. ;be ter.managipg.,theiir increaslrng,�,, pursued if the primary purpose Was to fund significant &:,O&Mand capital' �'....,Istormwat increases in b6ih capital and O&M costs rather than just c6s;ts_:- current SWP operations. A tility would require separate u 'establishinW,'a�new_ rate structure' (e.g., one based on impervious sutiace,area; and possibly slope and/or pollution -related factors), and include additional beneficiaries Withinthewatershe'd. Establishingi,a separate stormwater utility would require significant political will,,public support, and cooperatio6, from Adjacent,agencies. If'thi§.is:,the case, then the City should consider this approach. However, if the City is only going to continue providing the current level of SWP services,, then continuing to fund stormwater costs through sewer rates is a more reasonable and cost-effective approach. 46 Elizabeth Treadway, and Andrew L. Reese, Financial stra tegids for Stormwater Management, preprinted from the APWA Reporter, February 2000. 28 0- 7 6 8 5 - 50338 -028 . is 14 � t °4''i3��'tt,3liltll,a �ia3"rgtl�� sr�c,l'raY�r4kititl8if$4,1lt3�' 1�mi1CBi�9a.�C&, l �, a,,,,�. .,--...r.x _ --rwss r. E'. �?,.�. „�� r�:."�"�xa:�°.I�i-.Se'�``�;i.:g;'° r'•: .. s ,_.�?:z��f ,^twC�'« For stormwater programs funded through a dedicated For stormwater programs a stormwater funding mechanism, impervious area most direct! links the'benefits rate payers receive and SWP costs " through a dedicated ; Y p Y funded stormwater fu"riding mechanism, based on the land -use characteristics of individual impervious area m' si directly,properties: The C,ity.la'cks'the historical precedent of finks the benefrts�rate payers 'receive and SiNP cosis,based. on charging stormwater-related charges or fees to properties the land-useccharact' istics,of outside the City's utility servic6area(s), and at,this time ` § indivrdual propertres A2= probably lacks the necessary authority. The City would need to establish anew mechanism to do so; this could potentially be a separate (new) stormwater utility, assessment district, joint.powers authority, or similar entity. Under this.new stormwater entity,, all properties would be treated in thesame manner;. their impervious surface'area would be used to calculate their stormwater rate .47 ° As noted above, HDRbelieves'that,�the City's current use of sewer'rates to fund the SWP costs is reasonable and acceptable: The reasons why changing the rate structure may not necessarily be advisableinclude implementation costs, significant commitment of, staff time, etc., and raise a question as to whether the benefits of a new rate structureoutweigh the. costs. However, in light of the current unfunded and ex ec p ted'future increases in SWP costs, the City should move ahead with plans to develop' an impervious surface area based rate structure. City staff concurs that the SWP has reached the point where this is imperative due to the need to fund capital improvement costs. A new impervious surface area based rate structure could include various components; such as (1) measured impervious surface area (ISA) by parcel, ('2) ISA plus slope coefficients, (3) ISA plus pollution coefficients, (4) "tiered' residential and/or non-residential rates that; provide ranges of ISA tied to rates, or (5) some combination of the above. in ligiht'bf.the .current: unfunded ahcl; expected future increases rn SWP costs, the City should m6u";ahead ivith plans to." developari,imperviciussurface area.based rate; structure." The fundingrand assistance provided by other agencies within the'same watershed reflects the beneficial ,relationships between various flood control, water quality,, and habitat improvements,, and the long-term' interests of�those:other agencies. In the', City's'case, other agencies (notably Sonoma CountyWater:Agency,;Zone.,2A, and the -RCD) already provide funding and assistance in the form of limited storm water capital and -occasional channel maintenance projects rather than direct funding to the City or its sewer utility. However, given the planned capital projects and O&M activities that are currently under -funded, other agencies, ,as well.as the unincorporated areas in the watershed benefiting from the City's efforts, may be sources of, or partners with which to seek additional funding on a more regionally balanced and equitable sharing of costs. As noted in the industry surveys above, the, vast majority (93%) of beneficiaries within watershed were all charged the same stormwater fees. Currently, although the City receives limited funding ° 47 Other factors such as slope and pollutant factors may also be considered. 0 17 685 50338 028 29 :. as °. ,., •,_ ...�. _ ..£.�::jt�;€rf'�l'�t �iaaat� a ;liafrrasa�aatcr i'avag;raaea l air��liaa� l:a°.alas.aci�sia from other local agencies, it„receives very limited direct funding from unincorporated properties that benefit from the City's SWP unless they are sewer.customers of the City.48 In light of the continued increased flows from unincorporated areas`into the �City's SWP,.any new funding mechanism should carefully evaluate funding from these properties. How fees are collected from customers and/or properties is a separate discussion from the basis for the funding mechanism. However, there are three fairly straight -forward options: (1) inclusion in other utility bills.(e.g., sewer rates, the City's current method'), (2) direct billing through a separate stormwater utility, and (3) collection as a part of'county property taxes. 4.3 -Analyses of Kenefiriaries and Equity Over the years, SWP costs have increased as protection of surface and groundwater supplies has been given greater priority, particularly in the form of'specific,requirements embodied in NPDES permits. As a -consequence of this;"the importance of SWP funding mechanisms and additional funding _sources also increases. ;3:Basis for Funding.5tormwater Program with Sewer r un s One industryexpert summarized how stormwater systems have been typically funded as follows: "Most jurisdictions historically have paid for investments in stormwater infrastructure with revenues from property taxes and other general revenues. Many, if not most jurisdictions, ,now rely;on a variety"of sources' to finance comprehensive stormwater programs. One key observation frorii [the list of funding sources] is that' the sources of revenues most important for retrofit programs are property taxes and stormwater user charges. "49 This historical perspective should be considered when evaluating the City's stormwater funding mechanism becausei it shows the City'sic'urrent method is consistentwith the practices of many other municipal utilities with similar,responsibilities for stormwater programs. Ultimately,,the key factor in the City's current method rs evaluating whether it is appropriate for the .City to fund its consistent with, th'e practices of p cos through sewer rates is many other_municipal utilities r current stormwater program costs the,;relation"shi between SWP is and the benefits wrth srmliar responsr6ltities for received by sewer customers. If the City were to stormwater programs:, ,r. r � . implement a broader and,more,comprehensive funding mechanism, such as an impervious surface area -based fee, properties,that contribute runoff and receive benefits from the stormwater'system, yet are not sewer customers, would more equitably contribute their fair share of SWP costs. The SWP costs funded by sewer rates currently focus on annual maintenance activities and account for approximately 2% of the wastewater utility's total annual budget. Historically, SWP- 'd 48 The exception is.funding,from Zone 2Aiparcel tax=funded projects within Petaluma. 49 Lindsey and Doll, Finahcing Retrofit'Projects: The Role of Stormwater Utilities, from the proceedings of the EPA National Conference on Retrofit r Opportunities for Water Resource Protection in Environments, Chicago, Illinois, Feb. 9-12, 1998. 30 0768.5150338 028 f✓ tlit i t €iira► tiL !t� r l?l4� raala 3 uazdla� I � l�ia>:iss related capital improvements have included improvements to the wastewater, collection system to either eliminate or: reduce, combined sewer/peak wet weather flows associated with stormwater related I/1 (e.g.; the PIPS improvement in2001). Improvements that reduce the frequency or severity of SSOs, and the associated health and safety risks, have been undertaken at key system facilities, such.as pump stations: Until such time when, and i'f,-the sanitary sewer collection system, is, improved to significantly reduce I/I, the sewer collection'system must accommodate'the 'peak storm event flows. Several adjacent agencies or funding,entities (e:g., Sonoma County Waier,A'gency, Zone 2A and RCD) have also -funded creek channel improvements, watershed planning studies,°mapping, and improvements in both the City's service area and the larger Petaluma Watershed. Although we have stated that continuing to fund the City's SWP costs, through'sewer rates is a reasonable and,cost-effective• approach, in light of the backlog of capital improvements and deferred O&M activities°theCit'y'should consider other funding options and/or funding mechanisms in the future. 4.4 Conclusions The previous. sections have summarized the City's SWP, its facilities,; planned future improvements, the basis for evaluating funding mechanisms, and alternatives to the City's current use of sewer rates to fund'the SWRol-lowever, the'primary question this,evaluation addresses is whether. the City's current'rnethod is appropriate and reasonable, and what other alternatives the City might consider. HOR's conclusions°regarding these issues are outlined below. .1 Reasonableness of Using Sewer Rates to Fundithe City's SWP HDR believes the City's current -funding of`SWP costs through sewer rates is appropriate and meets the requirements of both cost of service principles and.Prop 218. The primary reasons for this conclusion are: M Stormwater Facilities I-lelp NJeetkPriniary Sewer System Ohjeclives: The City's,SWP directly supports the key objectives of•the City's wastewater collection and :treatment system, including protecting,the quality of surface water and groundwater. Additionally, sewer rates, including the component, have been subjected to Pro 21!8-ref funding eo"'' p , j p ated requirements.and approved through a', protest ballot, and public hearing process several times since this law was enacted 'in 1.995., 12 Storinwater Facilities Provide, Flood Control and Protect Sewer. System Customers: The City's SWP ,reduces SSO's, •I/b,flows, and the severity of flooding due to peak storm events. There is a high correlation between the properties receiving this benefit and the City's sewer customers. Stormwate.r Facilities Help Minimize Sever Bills: Apart froin.the City's SWP, the Ellis Creek WRF would have been designed to handle a larger I'/I=related peak capacity. Therefore, the SWP is directly responsible for reducing long-term capital arid_O&M 'costs at the WRF. IM Practicality and Ease ofAdministration: Unless the City commits to more adequate long-term funding for the SWP, continuing to -fund SWP costs at current levels through sewer rates is a practical and -,:easy -to -manage approach. 07685 '50338-02.8 3 till r ro r 3rtakl �Jndieal 1:.V:slara,cae�a1 elta€rr►�a°satcrxl' 4.4.2 Other Funding Options for SWP Capital and O&M Costs Although the City's current funding .mechanism by sewer ratepayers is appropriate and defensible; the City could move towards an impervious surface area based'rate structure in order to adequately fund, and allocate significant capital improvement needs and deferred O&M activities. The following are related'' actions the City should consider: 4 F the Crty could move towards; an,rmpeniious surface area based rate structure in order to more adequately funii..and- .., ailcicate' significant: capital rmp M. vement?`needs.and ,deferred E3 Creating a Separate Sform�' rater Utility: Establishing a separate:stormwater utility covering a broader service area than just the City's sewer service area; this could also take the form of an assessment district, joint powers authority, or similar entity. Further detailed evaluations of the relative merits of a stormwater utility versus an assessment district would be needed before the City could pursue either of these°options.so ® stabl isle ing Impervious Surface :area -Based fees: A rate structure based on impervious surface area (or a similar' ERU-based system) could include runoff and/or pollution coefficients to more equitably allocate°costs in proportion to cost -causation factors. These types of fees could be added as a separate fee on the sewer bill, or- through a new stormwater utility. However, this can be a complicated, time-consuming; and costly endeavor, so the City would need to believe there are significant' advantages, and be willing to make a serious commitment to this approach,before pursuing. this option. We would expect the City to only undertake this effort if: (1) the City,is willing to significantly broaden its stormwater management functions (e.g„ undertake extensive` capital improvements:,and an enlarged service area), and (2) it is politically'viable to implement significantly higher funding levels for SWP O&M and capital improvements. 13 Develc ping;.Additi€ nal Funding with Other.Agenc:ies: The Sonoma County Water Agency and RCD, already fund some SWP'O&M and capital costs,'and share in the watershed -wide benefits provided by the City's SWP. Additional cost -sharing and partnering with these agencies could be in the, form of capital improvements funded, and/or performed by these agencies, performance of'O'&M activities, annual.contribufiori.s to the City's SWP O&M costs, or a combinat_ibn of these approaches. Other options, might include re-establ'ishing,,the Petaluma'Watershed"Zone 2A benefit assessment arid'joint applications for grant"funding sources. l.evoloping,Iniplenientation flans:'HDR also recommends that the City conduct an implementation:study to determine more detailed plaris for establishing a separate stormwater utility, selecting a,specific rate structure, and developing related plans.for achieving these recommendations. j, 50 Evaluating these; differences is beyond the scope of this study. ...