Increase of the Stormwater Excise Tax - Phoenix City Code, Section 37-65(B)

This report provides information and background to the City Council regarding the
City’s Stormwater Excise Tax, the increased regulatory requirements of complying with
the stormwater discharge permit issued to the City by the Arizona Department of
Environmental Quality (ADEQ), and the potential to increase the Stormwater Excise
Tax to cover those increase regulatory costs.

THIS ITEM IS FOR INFORMATION AND DISCUSSION.

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 ADEQ. Administration of the
Stormwater Management Program (Program) requires a multi-departmental effort to
manage citywide stormwater quality to comply with the City’s MS4 permit.

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/private surfaces to retention/detention basins and surface
water channels throughout the City.

ADEQ issued the City a new MS4 Permit in July of 2021 that requires expansion of
existing program elements and implements new requirements that necessitate an
increased assessment to ensure compliance with these legal requirements.

New and expanded elements of the Program include: a new stormwater post
construction control program, retrofit feasibility study for improvement of water quality,
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
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.



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The Program is funded by a stormwater management program excise tax (SET) that is
assessed on water 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 to ensure compliance and ultimately
one that adds minimal staff to ensure that private sector compliance requirements are
met was chosen and the proposed increase reflects that model.

The SET was originally approved by City Council during fiscal year 1993-94 to defray
costs associated with the City’s MS4 permit (issued then by the United States
Environmental Protection Agency). Collection of the SET began in October 1993 and
was set up as a graduated rate based on the water meter size on the account. Since
SET implementation, there have only been two increases (1997 and 2010) to
accommodate expanded requirements of the city’s previous MS4 permit. The current
SET is $0.70 per single family residential meter.

City staff are evaluating increasing the single-family residential 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. Should the proposed increase become effective Oct. 1, 2023, staff
projects that this increase will raise sufficient revenue to cover the costs of complying
with the new MS4 permit for at least the next five years to October 2028.

City staff researched stormwater fees from similar cities that operate under a MS4
permit. Similar cities charge residential stormwater fees ranging from $3.75 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. Oklahoma City rates increase by meter
size and go up to $658.92 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
proposed changes are shown below.

A. All single-family residential accounts
Current Monthly Charge: $0.70
New Monthly Charge: $0.95


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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 following new and expanded
programs and practices required by the City’s MS4 permit, supplying a total of
approximately $2 million in additional revenue annually.

Stormwater Post-Construction Program
Under the new permit, the City is required to develop and implement a post-
construction program, applicable for all private and public development and major
redevelopment projects one acre in size or greater. The post-construction program is
required to inventory, track, inspect and confirm adequate maintenance of post
construction stormwater controls (e.g., retention/detention basins, stormwater
pretreatment devices, drywells, etc.). This program is currently in development with
public stakeholder meetings ongoing. This program will be managed out of the
Planning and Development Department and the SET will specifically support:

Staff positions (to be added as program needs require over the five-year time frame) to
develop and implement the program, including:
· Stormwater Post-construction Program Manager - to lead development and
management of program and supervise staff, complaint and enforcement response.
· Two Principal Engineering Technicians (anticipated to be hired in the 1st and 3rd
years of the program, respectively) - the primary staff evaluating functionality of post
-construction controls, field verification as needed, initial complaint and enforcement
investigation.
· Administrative Assistant I - to support the post-construction program, update
database information, prepare communication and outreach to stakeholders, etc.
· GIS/Engineering Technician - to focus on updating the GIS inventory of stormwater
post-construction controls in a timely manner. Options are being evaluated to
determine the most effective placement of this position.
· Database development/update, equipment and supplies, training development and


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educational outreach, and evaluation/outreach for continuous program
improvement.

The post-construction program is currently in development with four stakeholder
meetings complete and more planned in the future to get public input on the City’s
approach to the program. City staff have focused on creating a program that avoids
unnecessary expense for implementation. A few examples of how staff have designed
the post-construction program to avoid higher program costs include:
· Utilizing existing project closeout procedures to gather required inventory details;
· Placing the program in the Planning and Development Department to capitalize on
existing expertise and plan review functions;
· Emphasizing property owner (or their designee) inspections of post-construction
stormwater controls with a randomized subset selected for City staff inspections,
which;
· Minimizes City staff needed for inspections, tracking and enforcement actions;
· Encourages the property owner to identify post-construction control performance
concerns early to reduce the private costs of repair;
· Incorporate the post-construction program database needs into the ongoing
ShapePHX development process; and
· Utilize existing processes in the Street Transportation Department GIS and Central
Records divisions for spatial data management.

Water Services Department
To implement expanded responsibilities under the Water Services Department purview,
the SET will support the following:
· Staff to undertake significantly increased permit requirements including annual
public workshop and outreach, reporting, tracking, inspecting and facility
requirements.
· Environmental Quality Specialist- to verify and update Industrial and Commercial
facility inspection data, complete and submit Discharge Monitoring Reports, annual
report generation and documentation for program modification, coordination of
training and outreach requirements.
· Water Services Project Coordinator - to lead implementation and management of
program and supervise staff, assess rules/regulations for impacts on the
Department and City, report preparation, evaluate effectiveness of public outreach
and enforcement response, serve as primary contact for stakeholder activities.
· Customization, technical support, integration and interface with other city systems
(such as ESRI GIS, WAM, and LIMS) and annual software license for Compliance
Management Database.


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Street Transportation Department
The SET would support the following actions by the Street Transportation Department
to proactively manage and maintain the storm drain system:
· Develop a storm drain asset management program to identify, monitor and evaluate
storm drains to inform better decision-making related to storm drain capital
improvement projects. The increased SET would cover annual technical support
and software license for a cloud-based asset management program and interface
with other city systems (such as ESRI, GIS, SAP, etc.);
· Over time, perform a systematic citywide storm system assessment to proactively
identify concerns; and
· Perform up to 10 site specific evaluations of the approximately 800 known local
drainage problems. The evaluations would identify potential solutions to those
problem areas which could include the addition and/or extension of storm drain
lines, the addition of catch basins, and other flood mitigation efforts. As appropriate,
funds may be used to construct small scale physical improvements identified during
the site-specific evaluations to rectify drainage concerns.

These additions to the Program will keep the City in compliance with the new MS4
permit and will inform staff on the status of the storm drains to proactively, rather than
reactively, identify and address concerns.

Concurrence/Previous Council Action
· The City Council last approved an increase to the Stormwater Excise Tax on April 6,
2010 (Ordinance G-5491), in connection with the prior ADEQ stormwater permit
requirements.
· On Feb. 15, 2023, the Transportation, Infrastructure, and Planning Subcommittee
heard information on the proposed Stormwater Excise Tax increase that included
updates MS4 permit and new and expanded requirements.

Public Outreach
The Office of Environmental Programs along with the Planning and Development,
Street Transportation and Water Services departments will be conducting public
outreach in conjunction with water rates and/or rate component process through in-
person and virtual community meetings, social media and online outreach in the
months of March through May 2023.

Next Steps
Following public outreach, the proposed increased SET will be placed on the City
Council agenda for the June 28, 2023, formal meeting.


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Responsible Department
This item is submitted by Deputy City Managers Ginger Spencer, Alan Stephenson
and Mario Paniagua, the Water Services, Planning and Development and Street
Transportation departments, the Office of Environmental Programs and the City
Engineer.




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Report

Notice of Intention to Consider Increases in Water Rate Revenues and/or Rate
Components and Set Public Hearing Date to Consider Proposed Increase

In accordance with Arizona Revised Statutes, section 9-511.01, request the City
Council adopt this notice of intention to consider increases of up to 26 percent in water
rate revenues and/or rate components over the next two fiscal years, to consider a
decrease in the base allowance of cubic feet of water included with service, and set a
date for a public hearing to consider the proposed rate revenue increase.

THIS ITEM IS FOR DISCUSSION AND POSSIBLE ACTION.

Summary
In accordance with Arizona Revised Statutes, section 9-511.01, the City Council
announces its intention to consider increases in water rate revenues and/or rate
components over the next two fiscal years and set a date for a public hearing to
consider the proposed rate revenue increases.

Rate revenue increases are identified in the Water Services Department’s Financial
Plan as necessary to generate revenue required to maintain the reliable and cost-
effective water services and invest in the future of the City of Phoenix. The rate
revenues proposed will offset financial pressure imposed by substantial increases in
costs to supplies and materials due to inflation and maintain an adequate fund balance
to retain a AAA bond rating. A water rate revenue and/or rate component increase will
be considered that may total up to 26 percent for water to be effective over the next
two fiscal years. Decreasing the base allowance of cubic feet of water included with
service will also be considered. The following was provided to the Transportation,
Infrastructure, and Innovation Subcommittee for the proposed rate revenue increases
in FY2024 and in FY2025, shown below:

· Water rate revenue increases of 6.5 percent effective October 2023, 6.5 percent
effective March 2024, and 13 percent effective March 2025; and
· Decrease the allowance to 800 cubic feet in the summer months and 500 cubic feet
in the non-summer months from the current level of 1000 cubic feet in the summer
months and 600 cubic feet in the non-summer months.



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The water rate revenue and/or rate component increases will apply to all water service
customers served by the City of Phoenix.

The City Council sets June 28, 2023, at 2:30 p.m. in the City Council Chambers, 200
W. Jefferson St., as the time and place for the public hearing to receive public
comment on the water rate revenue and/or rate component adjustment proposal. The
components upon the conclusion of the hearing.

Information detailing the proposed adjustments to the water rate revenues and rate
components, Financial Plans, and the Five-Year Water Capital Improvement Program
will be available to the public at least 30 days in advance of the public hearing. The
information will be available 30 days in advance of the public hearing on the City of
Phoenix Water Services Department website: https://www.phoenix.gov/waterservices.
The information will also be available to the public at least 30 days in advance of the
public hearing in person at the City of Phoenix City Clerk Department, located at 200
W. Washington St., 15th floor, during normal business hours.

Concurrence/Previous Council Action
On Jan. 26, 2023, the Citizens' Water/Wastewater Rate Advisory Committee
recommended:
· Water rate revenue increases of 6.5 percent effective October 2023, 6.5 percent
effective March 2024, and 13 percent effective March 2025; and
· Decrease the allowance to 800 cubic feet in the summer months and 500 cubic feet
in the non-summer months from the current level of 1000 cubic feet in the summer
months and 600 cubic feet in the non-summer months.
· On Feb. 15, 2023, the Transportation, Infrastructure, and Innovation Subcommittee:
· Heard information on the proposed rate revenue increase that included updates on
the financial plans, inflationary pressures, and advanced water purification.

Public Outreach
The Water Services Department will be conducting public outreach through in-person
and virtual community meetings, social media, and online outreach in the months of
March, April and May 2023.

Responsible Department
This item is submitted by Deputy City Manager Ginger Spencer and the Water
Services and Finance departments.



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Report

Notice of Intention to Consider Increases in Wastewater Rate Revenues and/or
Rate Components and Set Public Hearing Date to Consider Proposed Rate
Revenue Increase

In accordance with Arizona Revised Statutes, section 9-511.01 request the City
Council adopt this notice of intention to consider increases of up to 20 percent in
wastewater rate revenues and/or components over the next two fiscal years and set a
date for a public hearing to consider the proposed rate revenue increase.

THIS ITEM IS FOR DISCUSSION AND POSSIBLE ACTION.

Summary
In accordance with Arizona Revised Statutes, section 9-511.01, the City Council
announces its intention to consider increases in the wastewater rate revenue and/or
rate components over the next two fiscal years and set a date for a public hearing to
consider the proposed rate revenue increases.

Rate revenue increases are identified in the Water Services Department’s Financial
Plan, as necessary, to generate revenue required to invest in the future of the City of
Phoenix by developing infrastructure necessary to prepare for declared shortages on
the Colorado River by rehabilitating the Cave Creek Reclamation Plant to include
advanced water purification; offset financial pressure imposed by substantial increases
in costs to supplies and materials due to inflation; and maintain an adequate fund
balance to retain a AAA bond rating. A wastewater rate revenue increase will be
considered that may total up to 20 percent for wastewater to be effective over the next
two fiscal years. The following was provided to the Transportation, Infrastructure, and
Innovation Subcommittee for the proposed rate revenue increases in FY2024 and in
FY2025, shown below:

· Wastewater rate revenue increases of 6.5 percent effective October 2023, 6.5
percent effective March 2024, and 7 percent effective March 2025.

The wastewater rate revenue and/or rate component increase will apply to all
wastewater service customers served by the City of Phoenix.



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The City Council sets June 28, 2023, at 2:30 p.m. in the City Council Chambers, 200
W. Jefferson St., as the time and place for the public hearing to receive public
comment on the wastewater rate revenue and/or wastewater component adjustment
proposal. The City Council may act to adopt the proposed adjusted wastewater rate
revenues upon the conclusion of the hearing.

Information detailing the proposed adjustments to the wastewater rate revenues,
Financial Plans, and the Five-Year Water Capital Improvement Program will be
available to the public at least 30 days in advance of the public hearing. The
information will be available 30 days in advance of the public hearing on the City of
Phoenix Water Services Department website: https://www.phoenix.gov/waterservices.
The information will also be available to the public at least 30 days in advance of the
public hearing in person at the City of Phoenix City Clerk Department, located at 200
W. Washington St., 15th floor, during normal business hours.

Concurrence/Previous Council Action
On Jan. 26, 2023, the Citizens' Water/Wastewater Rate Advisory Committee
recommended:
· Wastewater rate revenue increases of 6.5 percent effective October 2023, 6.5
percent effective March 2024, and 7 percent effective March 2025.


On Feb. 15, 2023, the Transportation, Infrastructure, and Innovation Subcommittee:
· Heard information on the proposed rate revenue increase that included updates on
the financial plans, inflationary pressures, and advanced water purification.

Public Outreach
The Water Services Department will be conducting public outreach through in-person
community meetings, social media, and online outreach in the months of March, April
and May 2023.

Responsible Department
This item is submitted by Deputy City Manager Ginger Spencer and the Water
Services and Finance departments.




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