Stormwater Management is poised to dominate dinner time conversation as new fees are being contemplated for Pennsylvania property owners in the coming months. While no property owner will be exempt from these fees, those who own large developed parcels will be most significantly impacted.
Stormwater Management Fees…Who Pays?
Who Is Affected?
All municipalities operating a storm sewer system to manage water runoff from roads, parking lots and buildings will be affected. Pennsylvania is among six states, plus the District of Columbia, that feed the Chesapeake Bay Watershed. This means that all rivers, creeks and groundwater within this watershed boundary eventually find their way into the Chesapeake Bay, along with any contaminants collected such as phosphorus and nitrogen.
As a result of EPA regulation, municipal governments must meet quality standards limiting the quantity of contaminants discharged into waterways.
What Are the Costs to Municipalities?
With tighter regulation and the threat of potential fines, the burden has fallen on Pennsylvania’s small municipal governments.
Many municipalities have adopted action plans to meet guidelines set forth by the EPA. Stormwater Management Plans (SWMPs) can include updating piping infrastructure, expanding treatment plant capacities, reinforcing stream beds and implementing green infrastructure technologies (e.g. rain gardens) to naturally filter water before being discharged into waterways.
Updates required to meet EPA guidelines can cost millions of dollars to build and the costs are being passed on to property owners in an effort to reduce strain on municipal budgets. For example, the Wrightsville Borough Municipal Authority is estimating their total expense to be $1.5 million with recurring annual maintenance of $200,000. As of July 2019, Wrightsville is still deliberating how best to manage this expense.
What Are the Costs to Property Owners?
The most popular option for municipalities has been the introduction of a Stormwater Management Fee (SWMF) to pay for infrastructure improvements. The amount each owner pays varies by municipality, but the formula remains relatively the same taking into account impervious surface area on the property.
AMOUNT OF IMPERVIOUS SURFACE ON A PROPERTY x SET RATE/SF = TOTAL OWED
(Impervious Surface Area is any material that does not allow water to pass through it. Think concrete, asphalt and building footprints)
This formula is popular among municipal officials as it spreads the cost equitably across all property owners, including properties with tax exempt status. The fee is not derived from the assessed value of a property, but rather the impervious surface the property contains. Value of the property plays no role in determining the SWMF.
Owning an industrial warehouse will typically incur a much higher fee than a farming operation. However, it is acknowledged that farming operations also contribute heavily to waterway contamination through use of fertilizers, pesticides, and animal waste. Though farmers may not immediately be assessed a SWMF, they will be affected by programs targeted at agricultural uses.
How Will the Fee Impact Real Estate or Land Development?
As this fee is relatively new, the widespread implications have yet to be witnessed, but examining some hypothetical examples can help illustrate the impact.
Consider a bank or retailer with a paved parking area and building footprint totaling 30,000 square feet. At a going rate of $17 per every thousand square feet of impervious surface area, this would incur an additional annual expense of $510 to the property owner. Spread this cost into monthly installments throughout the year and the cost is an additional $42.50 per month.
Here are more estimations for comparison:
Do I Have Options to Limit What My SWMF Will Cost?
Property owners have options available to alleviate the impact of the SWMF:
- Landlords can structure their leases so that any incurred costs can be passed on to the tenant. The SWMF would become part of the operating expense.
- Owners and landlords should seek out any available rebates or credits to minimize the assessed fee. Credits are awarded by the municipality to owners who demonstrate efforts to curb runoff on their property. These efforts can include replacing asphalt driveways with porous material that allows rain water to pass through, and capturing water from gutters into rain barrels before discharging into drains and sewers.
In addition to the rebate opportunities stated above, schools will qualify for additional rebates by teaching stormwater concepts to students.
How Long Will the Fee Be in Effect?
This fee is unlikely to disappear. As urbanization and development continue to increase, so does output of stormwater and potential for contamination. While these funds will be collected for the foreseeable future, we may see municipalities opt to collect the funds in other ways including millage rate increases (higher taxes). However, one could argue that collecting it as a fee based on impervious surface coverage is most fair.
Regardless of how municipalities decide to charge the fee, it is important to note that, by law, any funds raised as part of a SWMF can only be used to address the environmental repercussions of stormwater runoff.
Want to learn more about how Stormwater Management fees can impact your investment? Contact our Brokerage Advisory team at 717-854-5357.