Recommended Changes to Downers Grove Stormwater Utility

Recommended Changes for the FY2014
Downers Grove Stormwater Utility

Prepared by: Bill White
Presented via email: March 20, 2013
Contact: BillWhiteDG@gmail.com

The Stormwater utility is an essential
element of the Village’s long range financial
planning

 As of January 1, 2013 Downers Grove has
the highest SWU fee in the State of Illinois.
 With 15 years of projected 11% increases,
Downers Grove’s SWU fee could become
the highest in the nation.
 As the SWU fee continues to increase - year
after year - increased attention on the SWU
can be expected, whether political attention
or legal attention.

March 20, 2013 Recommended Changes VoDG Stormwater Utility
2

Stormwater utility needs to be on a
solid legal and political foundation
 Going forward, the stormwater utility should
be amended to be on the firmest possible
foundation, both legally and politically.
 The proposals contained herein will enhance
the transparency and fairness of the utility,
which is necessary for political stability.
 Also, dividing the revenue stream into
distinct components allows severability in the
event one or another aspect of the fee is
challenged, whether politically or legally.

3

Core Proposal:
Adopt Multi-line SWU bill

Divide the SWU bill into distinct categories:

 Annual O&M and Administration
 Storm Main Replacement Program
 Prior Debt Service
 New Debt Service and/or
 Direct expenditure on capital projects
Total Budgeted SWU fee revenue

Calculate each line item separately.
Bill items 1 & 2 across the entire village.
Bill items 3, 4 & 5 only within the watershed
benefited by the improvement.

4

Background:
User fees versus taxes
 “Taxes are an enforced proportional contribution
levied by the State by virtue of its sovereignty for
support of the government”
 “Service charges, tolls, water rates and the like are,
on the other hand, contractual in nature, either
express or implied, and are compensation [for
services provided]”
People ex rel. County of DuPage v. Smith (1961)
 “[A] tax may be distinguished from a fee by observing
that a tax is a charge having no relation to the service
rendered and is assessed to provide general revenue
rather than compensation. A fee, on the other hand,
is proportional to a benefit or service rendered.”
Church of Peace v. City of Rock Island (2005)
5

“User fees” and “taxes” must not be
seen as interchangeable terms
 The only Illinois Appellate Court decision addressing a challenge to a
stormwater utility hinged upon “whether the storm water service
charge was a tax upon real estate or a user fee.” Church of Peace v.
City of Rock Island (2005)
 The Florida Stormwater Association offers the following bullet points as
partial guidance to assuring that a charge is a fee and not a tax:

6

Demonstrate a clear & transparent link
between fees charged & services provided

 When a stormwater utility is adopted to fill
a budgetary shortfall, particular attention
should be given to “fee versus tax” issue.
 With user fees, there should be an easily
understood & transparent link between the
fees charged & the services provided.
 Transparency as to how the revenue will
be spent may be more important than
transparency as to how the fees will be
calculated and billed.

7

Bill with precision within each sub-
category and line item

 Operations: Bill only for actual expenditures
budgeted for current year, not estimates.
 Storm main replacement: Bill only for actual
expenditures budgeted for current year.
 Pre-existing debt service: Allocate by
watershed benefited by capital improvement.
 Future debt service and direct expenditures for
capital improvements: Allocate by watershed
benefited by capital improvement.

8

Disagreement on funding needed for
Recommended Level of Service (O&M)

 2006 Stormwater Plan -
Clark Dietz - $1.3 million O&M budget
Appendix H: “The Operations and Maintenance budget should be adjusted to approximately
$1.3 million per year. This allows the Village to implement maintenance activities at
appropriate frequencies, as recommended in this report. An additional 5 staff members are
needed to effectively implement the maintenance program.”
 2012 Exploratory Committee -
MFSG - $3.4 million O&M budget
“Exhibit 2 (see previous slide) shows that the recommended level of service includes O&M
expenses that total approximately $3.4 million in 2013. It is important to note that incremental
O&M expenses are not due to the formation of a stormwater utility but result from the
increased maintenance activities identified in the Master Plan.”
 Q: Why the discrepancy?
A: Possible answers include inflation, stormwater assets
added between 2006 & 2012 & operational expenditures
not included in 2006 estimates. Transfer of a portion of
fleet & equipment expenses to Stormwater Fund could
be another explanation.

9

Going forward:
Why quarrel over estimates?
 The O&M portion of the SWU fee could be set each year as needed to
pay actual budgeted operating expenses, namely Lines 15 through 18
plus the fleet maintenance and equipment portion of Line 19 found in
the Stormwater Fund (443) portion of the final approved Budget.
 For FY13 these amounts total approximately $1.8 million and only
modest increases are projected for FY14 or FY15

10

If SWU fees are user fees & not taxes,
bill actual expenses not estimates
 Actual Operations: Lines
15 through 18 plus fleet
maintenance/equipment
portion of Line 19 of
Stormwater Fund (443)
 Actual amounts budgeted
to replace storm mains
on 100 year cycle
 Actual debt service on
outstanding bonds
 Actual Budget for
Controlled Assets &
Capital Assets (Lines 20
and 21) less bond
proceeds applied to
projects.

11

Lack of transparency regarding
disposition of 2008 bond proceeds:
 How much money has
actually been spent on Year Adopted Budget Actually Spent
various capital projects
isn’t easy to ascertain. 2008 $ 6.81M $ 2.45M
 2009 Adopted Budget
did itemize dollars as 2009 $12.45M $ 5.14M
were actually spent on
various stormwater 2010 $16.56M $ 4.89M
capital projects.
2011 $ 9.50M $ 4.10M
 Subsequent budgets
lack that detail.

12

Street Projects or
Stormwater Projects?
 In the absence of itemized accounting for
expenditure of 2008 bond proceeds, it is
unclear whether funds were spent on
stormwater projects or other types of
capital improvement projects.
 No definitive Illinois legal authority exists
for paying debt service with SWU fee
revenue. The lack of a transparent
accounting for the actual expenditure of
2008 bond proceeds undermines the
premise that paying pre-existing debt
service is a “fee for service” transaction.

13

Going forward: Improve transparency for
current & future capital improvement plans

 Clearly disclose disposition of 2008 storm
water bond proceeds. Which projects were
funded by 2008 bonds & in what amounts?
 Increase transparent deliberation regarding
choice of future capital projects.
 Empower the Stormwater & Floodplain
Oversight Committee in the manner
recommended in Appendix E of the 2006
Stormwater Master Plan.

14

Allocate capital improvement costs on
a watershed-by-watershed basis
 Downers Grove has more than five
creek based watershed basins:
 Lacey Creek, St. Joseph Creek (north
branch & south branch) and Prentiss
Creek are the backbone of drainage
system.
 Glen Park Tributary, Ginger Creek &
Ward’s Creek / Sawmill Creek are
additional watersheds within Village
boundaries.

15

One size does not fit all as the five
watershed have different future needs
 Both 2007 WIIP & 2013 CIP show
that the future needs of each sub-
area are very different. A one-size-
fits-all SWU fee isn’t fair & may be
found arbitrary & capricious.
 Establishing subareas based on
hydrologic connection are a cutting
edge feature in stormwater utility
rate structures

16

Analysis of future needs by watershed

Watershed Acres % land area 2007 WIIP 2008-2014 2016+ CIP

Glen Park Tributary 325 3.5% 1.0%

Lacey Creek 2146 23.4% 28.6% ??.? 31.9%

St. Joseph (N) 3221 35.1% 28.5% ??.? 23.8%

St. Joseph (S) 1034 11.3% 29.4% ??.? 30.7%

Prentiss Creek 2294 25.0% 13.5% ??.? 13.7%

Knottingham 160 1.7%

9180 acres or approximately 14.34 sq miles

17

Sample authority re: watersheds
 Minnesota: “Water does not follow political boundaries; therefore
the boundaries of a district follow the natural boundary of a
watershed.”
 New England EPA: “If a stormwater construction project benefits
only a portion of a municipality, it can be funded by fees
assessed only to those properties within that area . . .”
 Florida: “Any facility benefit area containing different land uses
which receive substantially different levels of stormwater
benefits shall include facility benefit subareas which shall be
assessed different per acreage fees from subarea to subarea
based upon a reasonable relationship to benefits received.”
§ 403.0893, Fla. Stat. (1987)
 (Pending) Illinois HB 1522 (Rep. Sandack is co-sponsor): “All
fees collected by the County shall be held in a separate fund,
and shall be expended only in the watershed in which they were
collected.”

18

Miscellaneous suggestion:
For FY2014, repeal stormwater component
of Home Rule Sales Tax
 The FY2013 Budget included the following highlights:
 Implements the Stormwater Utility
 Reduces the Property Tax Levy by $1.98 million (15.2%)
 Shifts $1.95 million of Home Rule Sales Tax revenue from the
Stormwater Fund to the Capital Fund
 In 2007 Village increased Home Rule Sales Tax to fund
stormwater improvements. December 18, 2007 minutes:
Commissioner Tully commented that this ordinance increases the existing home rule sales tax from ½% to
¾% with the ¼% increase dedicated to the stormwater improvement fund. There is a sunset clause. If the
Village creates a stormwater utility at some point, he asked that the Council reconsider altering some of the
tax increases. The Mayor [Sandack] explained that the Council is adding ¼% to the Sales Tax for funding
stormwater projects. He added that it is a discreet fund. If new funds were to become available, he agrees
that the tax increases would have to be revisited. (emphasis added)

 Suggest abating $1.95 million in Home Rule Sales Tax
rather than abating $1.98 million in property tax levy.

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Summary of Recommendations
 Adopt multi-line SWU bill with severable line items
 Only bill for actual budgeted expenditures
 Pro-actively disclose detailed accounting for all capital
improvements paid for with SWU fees or paid for with
debt to be serviced by SWU fees
 Allocate all capital expenditures & debt service by
watershed
 Abate stormwater portion of Home Rule Sales Tax
 Empower Stormwater & Floodplain Oversight Committee
as recommended by 2006 Stormwater Master Plan

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END OF PRESENTATION

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