Stone Harbor to Explore Stormwater Utility Option

STONE HARBOR – The Stone Harbor Council authorized the release of a letter to the state asking for funding for a stormwater utility feasibility study at their meeting Nov. 1. The authorization came after a presentation by the borough’s Public Works Director Manny Parada.
New Jersey passed legislation in 2019 allowing municipalities and counties to establish utilities for the management of stormwater. The utilities also serve as an independent and dedicated funding source for stormwater management operations and capital projects. Opponents of the Clean Stormwater and Flood Reduction Act quickly labeled the bill a “rain tax.”
New Jersey came late to the stormwater utility party. The history of such utilities goes back decades to the mid-1960s. By the time the Garden State passed its legislation in 2019, there were 1,716 utilities across 41 states, led by Minnesota with 198, followed closely by Florida with 184. 
The concept has not caught on in the northeast. New Jersey has yet to establish its first utility and the adjacent states of New York and Connecticut have one each. Pennsylvania hosts 27 such utilities. 
What is Stormwater?
Stormwater is defined as rain or melting snow that flows off streets, lawns, buildings and other surfaces. In areas without significant impervious cover, much of the stormwater drains into the soil, which filters the water and deposits it in groundwater systems and aquifers.
 When stormwater encounters impervious surfaces, it runs off. In many cases, it is eventually collected at catch basins. In the journey to the catch basin, stormwater can pick up a variety of sediments, debris and contaminants, depositing them into storm drains and eventually waterways.
For decades, stormwater management has been seen as an important part of residential and commercial development. With the growing concern driven by more frequent severe rain events, the need to manage and pay for stormwater operations and development has taken on a new dimension. 
The goals of stormwater management are usually cited as reducing water pollution, ameliorating flooding and establishing a dedicated funding source for the maintenance and development of stormwater infrastructure. 
Why a Stormwater Utility?
As Parada explained to Stone Harbor’s council, a stormwater utility in the borough would provide a stable and dedicated source of funding for the many projects the borough has planned as part of its flood mitigation efforts. 
The concept of the utility, he said, is that it has a funding stream that is not based on the assessed value of property, but rather on that property’s level of runoff due to its amount of impervious surface area. It is considered an equitable fee structure in that it theoretically charges the most to the properties that have the greatest level of runoff. In this way, it incentivizes property owners to reduce impervious surface area in order to reduce their fees. 
There are various ways in which a fee system can be structured. The best method for use in Stone Harbor will not be clear until a preliminary feasibility study is completed, Parada said. He did explain that funds collected by such a utility must be dedicated to stormwater operations and capital development and cannot be used for other borough purposes. They are not as flexible in their use as property taxes. 
Parada also told the council that a utility fee structure can be adjusted depending on the level of funds needed in specific project years. A check of some existing stormwater utilities does not show much evidence that fees are lowered in years when less funding is needed for direct projects. Stormwater utilities become debt management vehicles as well since many capital projects cannot be covered simply by the amounts collected in given years in terms of annual fees. 
The point of most of these utilities is the recognition that stormwater systems most property owners have accepted as part of municipal services are becoming more expensive to design, construct and maintain. A stable and decided source of funding is what these utilities are established to provide. 
It should be noted that there are a variety of ways in which the rate structure for such utilities can be structured. Parada explained that the two most often used methodologies involve either a tiered payment scale applied to properties grouped into tiers by characteristic or an equivalent residential unit scale based on a fee-per-unit of measurement or space. In both, the focus is on impervious surfaces.
Opposition
New Jersey’s bill setting up the potential for stormwater utilities was strongly opposed by Republicans in the legislature. The opposition termed it a rain tax or a tax on the weather. They argued that it would result in uneven enforcement on the business community, emphasizing that small businesses in the state are already overtaxed. 
Republicans also say that it adds another layer of government with the ability to tax residents. While the bill’s supporters claim that the utilities would relieve the burden of the stormwater management investments from the property tax, opponents say it would not result in any lowering of property taxes in a state that already is the most heavily taxed in the country. 
They also note that New Jersey has established a structure in which the stormwater utilities would be regulated by both the Department of Community Affairs and the Department of Environmental Protection, setting up another regulatory tier for local governments and residents to deal with. 
What Happens Next?
The letter to the state authorized by the council seeks funding support for a preliminary feasibility study. If approved the state will fund appropriate consultants to develop the study while the borough will bear the burden of the demands the study places on professional staff.
As explained by Parada and by borough administrator Robert Smith, the concept, as it has been explained to the borough, is that a decision to go forward or not go forward once the feasibility study is complete has no adverse impact on the municipality. If the borough does not elect to move to the next steps in establishing a stormwater utility, there is no “payback” of the funding the state invested. 
The underlying statute that makes such utilities possible does contain another option for funding the study if a state grant is not awarded. The borough can front the cost of the study and reimburse itself from the utility’s revenue stream should the borough move forward and establish one.
Thoughts? Questions? Comments? Email vconti@cmcherald.com.