Title
Amend Phoenix City Code Section 37-65(B) to Authorize an Increase in the Assessment of the Stormwater Excise Tax (Ordinance G-7127)
Description
Request the City Council amend Section 37-65(B) of the Phoenix City Code to adjust the Stormwater Excise Tax (SET) to increase revenue for the Stormwater Management Program, effective Oct. 1, 2023.
Report
Summary
The City of Phoenix operates a Municipal Separate Storm Sewer System (MS4) via a permit issued under the Federal Clean Water Act from the Arizona Department of Environmental Quality (ADEQ). Compliance with the City's MS4 permit requires a multi-departmental effort to manage citywide stormwater quality via the City's Stormwater Management Program (Program).
Generally, the MS4 permit authorizes discharges from the City's stormwater infrastructure into protected surface waters. The City's stormwater infrastructure includes catch basins, storm drains and outfalls that collect and convey stormwater from streets and other public and private surfaces to retention/detention basins and surface water channels throughout the City. ADEQ issued the City a new MS4 permit that became effective July 1, 2021. This new permit requires the expansion of some existing Program elements and the addition of new Program elements.
New and expanded elements of the Program include: a new stormwater postconstruction control program, a retrofit feasibility study, expanded public outreach requirements, expanded inspection requirements, and expanded reporting and mapping requirements. Non-compliance by the City with the MS4 permit would result in notices of violation and fines from ADEQ and the U.S. Environmental Protection Agency. Other cities across the country who have failed to comply with their stormwater permit are operating under a consent decree, a significantly more stringent and inflexible process.
The Program is funded by a stormwater excise tax (SET) that is assessed on city services bills in accordance with Phoenix City Code Section 37-65(B). The current SET is not sufficient to cover the costs of the new and expanded permit requirements. An increase in the SET is needed to fund the new requirements and for the City to maintain compliance with the MS4 permit.
Staff evaluated multiple implementation methods for new Program requirements for compliance and the approach that adds minimal staff for private and public sector compliance requirements and keeps costs as low as practicable was selected. The proposed increase reflects that approach.
The SET was originally approved by City Council during Fiscal Year 1993-94 to defray costs associated with the City's MS4 permit (then issued by the U.S. Environmental Protection Agency). Collection of the SET began in October 1993 and was set up as a graduated rate based on account water meter size. Since SET implementation, there have only been two increases (1997 and 2010) to accommodate expanded requirements of the City's prior MS4 permits. The current SET is $0.70 per single family residential meter.
City staff are requesting an increase in the typical single-family residential water meter rate from $0.70 to $0.95 per month. In accordance with the SET structure, the proposed increase is scaled at a graduated rate by meter size using the equivalent dwelling unit methodology.
City staff researched stormwater fees from similar cities that operate under a MS4 permits. No precise equivalent for MS4 permit requirements and stormwater fee approach was found. Of the most similar cities (either in terms of permit requirements or stormwater fee approach), stormwater fees ranged from $3.75 per month to $18.06 per month, except for Tucson, which charges $0.13 per month specifically to fund green stormwater infrastructure projects. Of the cities investigated, the closest equivalents to Phoenix for activities using the fee are San Jose, Calif., San Antonio, Texas, and Oklahoma City, Okla. These cities have monthly residential stormwater fees ranging from $3.75 to $14.95 per month. City of Scottsdale, Ariz. has a flat stormwater fee of $6.10 for all customers.
The City of Phoenix monthly charges currently assessed to water users and the requested changes are shown below.
A. All single-family residential accounts
Current Monthly Charge: $0.70
New Monthly Charge: $0.95
B. All other water accounts based on water meter size as follows:
Meter Size Current Monthly Charge New Monthly Charge
5/8” or 3/4” $0.70 $0.95
1” $1.46 $1.99
1.5” $3.50 $4.77
2” $4.85 $6.61
3” $12.80 $17.44
4” $19.75 $26.91
6” and Larger $30.00 $40.88
The new SET rate would provide funding for the new and expanded programs and practices required by the City's MS4 permit, supplying a total of approximately $2 million in additional revenue annually. A summary of the permit requirements and needed resources are included in the attached SET Report (Attachment B).
Concurrence/Previous Council Action
The City Council last approved an increase to the SET on April 6, 2010, (Ordinance G-5491) in connection with the prior MS4 permit requirements.
On Feb.15, 2023, the Transportation, Infrastructure and Planning Subcommittee heard information on the proposed SET increase, and on April 18, 2023, information on the proposed SET increase was heard at the City Council Policy Session.
Public Outreach
The Office of Environmental Programs, along with the Water Services, Planning and Development, and Street Transportation departments, conducted public outreach in conjunction with the Water Services Department's water and wastewater rates outreach efforts in the months of March through June 2023.
See Attachment A for detailed outreach information.
Department
Responsible Department
This item is submitted by Deputy City Managers Ginger Spencer and Alan Stephenson, the Water Services, Planning and Development and Street Transportation departments, and the Office of Environmental Programs.