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Democracy on the Front Lines
City Administrator’s Blog
Walter Denton
November 30, 2005
The Stormwater Advisory Committee is close to a recommendation. At last night’s meeting, the committee discussed options for funding stormwater improvements. They recommend that the City needs to spend about $1.2 million per year for an adequate stormwater program that includes maintenance, capital construction, and regulation enforcement.
The case for an expanded stormwater program is compelling. The current stormwater budget includes $250,000 from the ½-cent Prop S sales tax and $185,000 in general fund resources. A Stormwater Master Plan was developed last year that identifies more than $12 million in needed projects. In addition, a citizen survey conducted last April stated that only 34% of respondents feel that the City’s storm drainage program is “good” or “excellent,” and 55% agree or strongly agree that stormwater is a major problem in O’Fallon. (Click here for more information about O'Fallon's stormwater program.)
The facilitator at the committee meeting made an illuminating distinction between “money” and “revenue.” Money is one time funds that become available for use, often for special purposes. They are non-recurring and include such things as grants, loans, bond proceeds, development fees, and impact fees. Money cannot be counted on from year to year and cannot be the foundation of a sustainable stormwater program. At this point, Prop S funds are classified as “money,” because the ½-cent sales tax is set to expire in 2010. Once we become home rule, the City Council can choose to extend the tax but until then it cannot be counted upon to be the sole answer.
Revenue is like income. It is constant and dependable, normally changing only slightly from year to year. The two primary sources of revenue are taxes (property, sales, etc.) and user fees (water, sewer, trash, electric, etc.). A long term comprehensive stormwater program can be developed with revenue, and there is confidence it can be funded.
Therefore, you want to structure O’Fallon’s stormwater program with revenue rather than money. Money can used to supplement the program, but you do not want to be dependent on it. So what are the options for revenue sources?
On the tax side, there are basically just two choices: property tax and sales tax. Property tax is a stable revenue source that would bring in a steady revenue stream. However, the City Council has not increased the property tax in 15 years in support of the public schools, and the property tax is historically the most hated tax among residents. The Stormwater Advisory Committee quickly dismissed this as a possible revenue source.
The sales tax is a little more attractive. They are more acceptable to residents, but they are unstable and are highly competitive. O’Fallon’s sales tax rate of 1.5% (7.6% total) is currently equal to Fairview Heights and 0.5% higher than Shiloh, so we would be at a competitive disadvantage for economic development if the City raised the sales tax for stormwater purposes. As an alternative, the City Council could decide to make the Prop S sales tax permanent and more funding could be allocated to stormwater. There may be some flexibility to increase Prop S allocations to stormwater, but there is not enough in Prop S to fund the whole program.
The final option is to establish a stormwater utility fee. It is based on the premise that the urban drainage system is a public system, similar to a water or sewer system. When a business or resident uses the water or sewer system, the user pays. Similarly, when an open field is paved for a house or a business, a greater flow of water is placed on the drainage system. The greater the parcel of land is paved, the greater the user fee. Landowners can receive credits for on-site detention, but generally commercial operations with large paved areas will pay more in stormwater fees than residences. Residential rates typically range betwen $3.50 and $5.50 per month.
Stormwater utilities have been around for a while, established by more than 400 cities nationwide. They are fairly new in Illinois but have been upheld in court as a viable funding source. The fees are equitable, sustainable, and accountable for funding a stormwater management program.
The committee is leaning toward a combination of Prop S funds and a stormwater utility fee. They will finalize their recommendations over the next month, and a formal presentation will be made in a special Public Works Committee meeting in January. No one likes to pay more in their utility bill, but revenue has to come from somewhere to address these stormwater problems. The alternative is to keep the City’s stormwater program where it is now, and it is obvious from the citizen survey that the status quo is not sufficient. In the end, what is it worth to solve these long-standing problems? Would residents rather not pay more and persevere?
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