Council prepares for reworked drainage fee

In the wake of last year’s ruling that the city’s stormwater drainage charge is unfair to certain residents, City Council will hold a public hearing today to consider adopting a new fee structure that staff says would be more equitable overall.

According to Watershed Protection Department Director Victoria Li, who unveiled the proposed structure in December 2014, Council must make a decision this month in order to incorporate the changes into the upcoming budget and fiscal year, which starts in October.

Li wrote in a memo to Mayor Steve Adler and Council on April 30 that, if Council adopts the proposed structure, “all customers will be charged in the same way, thus making this proposed change land-use neutral.”

Adler noted in a Council work session on Tuesday that the proposed fee structure would positively impact residents of multifamily properties, many of whom are renters. He tied the development into Council’s ongoing conversation about increasing the homestead property tax exemption as Council members prepare to adopt the next budget.

“We’ve had a conversation about helping homeowners, we’ve had a conversation about helping renters, and it continues to be my view that not everything we’re going to do is going to help everybody and that we have to do what we can with the tools that we have to help everyone,” Adler said.

According to Li’s memo, the proposal would decrease the average monthly drainage charge by $3.50 for residents of multifamily properties that are six stories or fewer, $3 for residents of multifamily properties that are seven stories or more, $3.10 for residents of three- or fourplexes and $2.10 for residents of duplexes.

The proposed changes would decrease the average drainage charge for residents of approximately 46 percent of single-family properties and increase it for residents of approximately 54 percent of single-family properties, depending on property size and other factors.

Adler related the figures to a May 13 Council discussion about the potential implications of increasing the homestead exemption, particularly if non-homestead property owners were to pass an increased property tax burden onto renters.

Budget Office staff projected that implementing a 6 percent exemption this year at a rollback tax rate of 48.24 cents per $100 of valuation would not impact revenue, would reduce the median homestead tax burden by $49 this year, and potentially increase the rent of the average apartment by 53 cents per month and the average single-family home by $1.33 per month.

If Council were to choose this option, it would likely be part of a four-year phased plan to raise the exemption to 20 percent.

The cost savings to many renters from the proposed drainage fee structure, Adler said, would be roughly seven times what the potential monthly increase would be from the proposed homestead exemption next year, if the tax burden were to be shifted to renters. “I continue to believe that it wouldn’t be passed through,” he added.

“It’s important to me as a member of this Council who’s concerned both about affordability for renters and homeowners that we are doing things as part of a larger package, that we’re not doing things in isolation,” Adler said.

Council Member Greg Casar suggested that Council adopt the new fee structure only on first or second reading of the ordinance today and take some additional time to consider it before adopting it on third – and final – reading, presumably at next Thursday’s meeting.

Casar also pointed out the role that the legal system has had in the proposal of the new fee structure. “I think there is also a difference between being proactive and searching for affordability solutions,” Casar said, “and trying to fix what we were doing wrong as far as courts were concerned in the past.”

State District Judge Amy Clark Meachum ruled in June 2014 that the current fee structure, which doesn’t necessarily take into account a resident’s impact on the drainage system, is unfair to many residents of multifamily properties. The city filed an appeal on Oct. 2, but the court has not taken further action.

The proposed structure is based primarily on that drainage-system impact, taking into account the property’s lot size, the amount of impervious cover it includes and the ratio of impervious to pervious cover on the lot.

Impervious cover is any material, such as concrete, that prevents rainwater from penetrating the ground and contributes to a property’s impact on the city’s drainage system.

Under the current structure, the city charges customers based on property type and other factors. Most residential customers pay the same amount, unless they live in high-rises or multifamily properties that are seven or more stories tall.

In the current fiscal year, for example, residents of single-family properties and most multifamily apartment complexes pay $9.80 per month, while high-rise residents pay $4.90 per month.

“As an entire category, charges to multi-family residents will be reduced from about 27% to 18% of the total drainage utility fund share,” Li wrote. “So, while complete unit counts are not currently available, the vast majority of tenant drainage charges are expected to significantly decrease.”

Among other impacts to nonresidential properties, the plan would increase the average monthly drainage charge for commercial properties by $36 and for industrial properties by $25.