Stormwater Utility

CovStormwater Utility

What is a stormwater utility fee and why?

Property owners are billed quarterly for water and sewer charges. The amount of your bill that goes toward stormwater and sanitary sewer usage is currently based on how much water you use. This is fair for sanitary sewer costs (most of the water you use goes down the drain and into the sewer system) but is not a fair way to bill for stormwater costs. A stormwater utility fee would correct this inequity.

History

In 2014, the basis for billing for stormwater charges was challenged in Oakland County Circuit Court. In Schroeder vs the City of Royal Oak, the plaintiff alleged that the water and sewer rates violated the Headlee Amendment because charges assessed were, in fact, a tax intended to raise revenue rather than cover the costs of the water and wastewater system.

What was the Outcome?

The city ultimately settled the lawsuit for $2 million payable into a fund to reimburse ratepayers. As part of the settlement agreement, the city was required to alter the methodology for recapturing the debt component of the stormwater system by July 1, 2018.

As a short-term solution, the city was authorized through the Michigan Drain Code to levy an ad valorem tax to fund debt service through 2019. An ad valorem tax is not a desirable means of paying for stormwater costs as it does not result in a fair distribution of cost nor does it encourage property owners to manage their own stormwater as there is no financial benefit for them to do so. (See diagram below.) It also exempts institutions such as schools, churches, and hospitals which contribute significant amounts of runoff.

As a result, the City of Royal Oak is implementing a separate stormwater utility fee that will charge property owners based on stormwater runoff and credit those who reduce stormwater runoff from their property.

What’s Fair?

In the example below, both properties are identical in size and use the same amount of water annually. Under the current system in place, the owners of property  “A” would pay approximately the same stormwater costs as property “B.”  Clearly, “A” — with its larger dwelling footprint, garage, and long driveway — creates more stormwater runoff than its neighbor.

A stormwater utility fee would credit those properties that create less or reduce stormwater runoff. Under such a system, the owner of property “B” would pay less.

Typical Lots