Stormwater ‘Rain Tax’ Bill Awaits Governor’s Signature

TRENTON – New Jersey Republicans are warning property owners to hold onto their wallets when the sky starts to cloud up. Calling the recently passed stormwater utility bill (A2694 and S1073) a “rain tax,” opponents of the bill argue that the state has found a new way to tax property owners who are already among the most heavily taxed in the nation.
Supporters of the legislation argue that the state has a major problem with pollution from stormwater runoff, a problem that endangers many of New Jersey’s waterways. The increase in severe rain events associated with climate change exacerbates the problem, according to them.
Looking to 40 other states that have passed legislation to aid in stormwater management, the advocates of the bill say that the impact of the legislation will be to help local communities fight pollution and reduce flooding by providing a dedicated revenue source with which to manage stormwater systems. 
What Does the Bill Say?
The bill allows, but does not compel counties and municipalities to establish and operate stormwater utilities. It further authorizes the utilities to charge fees and issue bonds in order to finance the creation, maintenance, and operation of the utilities. Enforcement power to compel payment of the fees levied is also included.
The bill would focus on stormwater runoff from rain and flood events that “runs off” impervious surfaces like roads, roofs, driveways, and parking lots. The proponents of the bill argue that this runoff carries with it debris, bacteria, and chemicals that eventually find their way into state waterways and drinking water.
The current stormwater infrastructure, supporters of the bill say, is inadequate to manage the problem, suffering from years of neglect and lack of investment.
The state summary of the bill points to a U.S. Environmental Protection Agency report that ranks stormwater management as New Jersey’s most expensive water-related funding need, with an estimated total of $15.6 billion ultimately required.
This bill assumes that most of the burden for management and funding of stormwater systems is located with local governments. Advocates say that the bill provides a sustainable way to help counties and municipalities tackle the problem of aging or non-existent stormwater management systems, reducing flooding and keeping runoff from reaching waterways.
Fees charged to property owners will support the utilities. All funds are required to be used for initiatives that reduce runoff and stormwater-related flooding. The bill requires that 5 percent of the fees collected be sent to the state for use by the Department of Environmental Protection (DEP) in its stormwater management efforts.
Another provision allows municipalities to take 5 percent of any unspent funds annually in support of the local budget. Opponents point to the percentages going to the state and local governments as proof that this is just another revenue stream, one that is not restrained by the 2 percent annual cap on local purpose tax rate increases.
What the fees will be, how they will be calculated, and how impervious surface areas will be determined all represent details not in the bill. DEP is charged with developing guidelines for use by municipalities that elect to establish utilities. These guidelines would include rate structure guidance.
Across the country, local stormwater utilities use a variety of ways to calculate fees.
As of December 2018, Alexandria, Va. charges a single-family residential property from $140 to $233 a year depending on square feet of impervious surface.
Cincinnati, Ohio uses a formula that multiples what it calls one Equivalent Runoff Unit by both an intensity development factor and the square feet of the parcel.
Commercial properties, with parking lots and large roof areas are often subject to separate calculations.
One should not get the idea that these utilities are everywhere but here. In 2017, Brookings counted 1,583 such utilities in the country with almost half concentrated in five states, Minnesota (197), Florida (180), Wisconsin (126), Washington (117) and Ohio (105). Over half of the nation’s stormwater utilities are located in large metro areas where the runoff concerns are highest. 
Another Bureaucracy?
Opponents of the bill point to the establishment of another bureaucracy to sit alongside municipal utility authorities that currently manage drinking and wastewater systems. With no state formula for fees, no definition of impervious surfaces and no cap on annual increases, those who oppose the bill warn that it is an unrestrained hit against already heavily taxed property owners. 
Maryland implemented a tax on paved surfaces in 2012. It was attacked by its opponents as a “rain tax.”
In Maryland, where most local government activities occur at the county level, the nine counties were given the flexibility to implement the law’s provisions as they saw their own needs. In 2014, gubernatorial candidate Larry Hogan campaigned hard against the measure, won the election and repealed the tax.
Advocates of stormwater management utilities in Maryland argue that Hogan let developers off the hook for paying their fair share when major flooding occurs, as it did in Ellicott City. Advocates of the repeal counter that the state benefits from development when it is not stifled by unnecessary regulation. 
A Partisan Divide
In New Jersey, all of the controversy is swirling around a bill that passed both houses of the state legislature Jan. 31 with highly partisan votes. In the Assembly, which passed the act by a 45-to-31 vote, not a single Republican voted for the bill. The Republicans were joined by seven Democrats who also voted no. 
Forty-four Democrats and one independent voted to pass the legislation.  There were three Republicans and four Democrats who did not vote.
The Senate had a similar partisan vote with 23 Democrats and two Republicans giving the act the majority it required, and 15 Republicans and two Democrats voting no.
The bill is still awaiting the governor’s signature. He is expected to sign it.
As with any such argument, the future is in the details. How will fees be structured? Will most municipalities establish utilities?
What is the oversight mechanism for the utilities? How will impervious surfaces be defined? These and many other questions await clarity.
To contact Vince Conti, email vconti@cmcherald.com.