STONE HARBOR – Just months after it pushed off a stormwater utility study to next year at the earliest, the Borough Council has reconsidered and is thinking about approving and funding such a study as an immediate need.
The change came at the council’s Sept. 3 meeting, when borough Administrator Manny Parada gave an updated presentation on the benefits of such a utility.
A stormwater utility is a separate and self-financing arm of municipal government that does not depend on funding from the general fund budget. The utility is regulated by both the state Department of Environmental Protection and the Department of Community Affairs.
Its purpose is to provide a stream of revenue for flood mitigation efforts, dealing with the negative impacts of stormwater runoff. It establishes a fee structure that charges property owners for the amount of runoff from their properties, based largely on impervious surface areas. The fees can be used to fund staffing and projects related to flood mitigation.
The staffing and the projects that fit within the boundaries of the utility are then removed from the general budget, providing greater spending flexibility to the general fund.
The thinking of some council members about when to undertake a study of such a utility apparently changed because of a conundrum in which the borough is facing a series of unattractive options in balancing the upcoming 2025 budget, specifically in regard to the state spending cap.
Operating costs for borough services have gone up significantly faster than its spending authority under the state’s 3.5% appropriations cap. High on that list of operational spending have been staff salaries, wages and benefits. This situation was covered in a presentation at the Aug. 20 council meeting by outside auditor Michael Garcia.
With a tight spending cap impacting new budget development, Stone Harbor may be facing layoffs if it cannot find other ways to stay within that cap. An exploration of shared services is under way by the DCA’s Local Assistance Bureau.
A stormwater utility would not offer immediate relief. Parada said the earliest such a utility could be in place in Stone Harbor is 2027. The same lack of immediate relief may be true for the Local Assistance Bureau study, which the council was told could take six months to a year. It would then have to be reviewed by the council, and any shared services arrangements would have to be worked out with a separate municipality.
Parada’s presentation on Sept. 3 was based on one he initially gave in 2022, when he introduced the potential value of a stormwater utility for the borough. He mentioned that two studies would be needed – one detailing the engineering projects the borough should consider as part of the flood mitigation plan, the other the financing of those projects through the establishment of a fee structure.
As Parada explained it, the engineering study would lay out a plan for flood-related capital projects that the financial study would then analyze for their impact on a potential fee structure. There is $375,000 in the adopted budget to fund the studies.
The borough did apply for a state grant to pay for a feasibility study in 2022 but was not selected as a recipient.
Earlier this summer, at the July 2 council meeting, utilities committee Chair Robin Casper said her committee was recommending to the full council that no action be taken to initiate a stormwater utility feasibility study in 2024.
Casper argued that a small borough like Stone Harbor, already well-developed, should wait to study the experience of other New Jersey towns as they implement such utilities. The two other members of the council who serve on her committee are Victor Foschini and Tim Carney.
At the July 2 meeting there was no dissent offered, and it appeared the feasibility study that had been included in the 2024 municipal budget at $375,000 would be pushed off. It is now on the front burner again.
New Jersey introduced stormwater utilities in 2019 to a chorus of criticism from state Republicans, who called the new law a “rain tax.” The argument was that this was a mechanism to obviate the state caps on the tax levy and on annual growth in spending: It was a way for a municipality to spend more by taking a part of its obligations in flood mitigation and putting it in a utility, calling the mandatory revenue stream a fee instead of a tax.
Such utilities are also able to take on separate debt. That debt would still be the borough debt ultimately, but it would be repaid from the fee income and not be part of the borough’s general fund debt service.
Supporters argued that the state caps did not give municipalities the flexibility to tackle expensive capital projects related to flood mitigation. They said a utility, based on actual property runoff, was a more equitable way of charging property owners because it was not based, as taxes are, on property value but rather on the degree to which a property contributes to the stormwater problem. They also argued that the utility fee sets up an incentive for property owners to take measures to reduce their runoff as a means of reducing their stormwater fee.
Stormwater utilities are not new. They began on the West Coast and moved eastward. A 2022 survey by Western Kentucky University showed about 2,000 operational utilities. The have not been widely established, but are found in large clusters in states such as Texas, Florida, Minnesota, Maryland and Oregon, which together account for 46% of the country’s stormwater utilities.
New Jersey has only one operating utility, in New Brunswick. Such a utility’s value, Parada pointed out, is that its fees are not part of the property tax, and so tax-exempt organizations like Rutgers University have to contribute to the stormwater fee in proportion to their runoff. Stone Harbor does not have a large amount of tax-exempt property.
Parada said about 50 other state municipalities are in the process of studies and evaluations of stormwater utilities. He said there would be several more established in the state before Stone Harbor needed to commit.
The council will formally consider approving and funding the stormwater utility studies at its next meeting, on Sept. 20.
Contact the reporter, Vince Conti, at vconti@cmcherald.com.
