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Municipal Stormwater Permitting in Pennsylvania

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This presentation provides an overview of recent changes in municipal storm water permitting and how municipalities in Pennsylvania are addressing the changes.

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Municipal Stormwater Permitting in Pennsylvania

  1. 1. © 2016 McNees Wallace & Nurick LLC www.mwn.com Harrisburg, Pennsylvania October 26, 2016 The Evolution of Municipal Storm Water Permitting and Emergence of the Storm Water Authority in Pennsylvania 100 Pine Street T 717-237-5290 abakare@mcneeslaw.com Ade Bakare, Esquire Energy and Environmental Group Harrisburg, PA 17101 100 Pine Street T 717-237-5462 thorstmann@mcneeslaw.com Timothy J. Horstmann, Esquire Financial Services and Public Finance Group Harrisburg, PA 17101
  2. 2. © 2016 McNees Wallace & Nurick LLC www.mwn.com Municipal Storm Water Permitting  EPA has two phases of storm water regulations  Phase I  Categories of industrial activities  Large construction projects (5+ acres of disturbance)  Large MS4s (serve 250,000+)  Medium MS4s (serve 100,000+ but less than 250,000)  Phase II  Smaller construction activities (1-5 acres disturbance to point source)  Small MS4s (generally, not large or medium; serve under 100,000)  EPA storm water enforcement activity on the rise in PA! 2
  3. 3. © 2016 McNees Wallace & Nurick LLC www.mwn.com Municipal Storm Water Permitting  Chesapeake Bay is "impaired"  Entire watershed subject to TMDL for nitrogen, phosphorous, and sediment  MS4 permitting approaches are evolving in states like PA and MD 3
  4. 4. © 2016 McNees Wallace & Nurick LLC www.mwn.com Municipal Storm Water Permitting  Executive Order 13508 on May 12, 2009  Established Chesapeake Bay Commission to oversee restoration  Increased Accountability  2-year Milestones  EPA and Chesapeake Bay Program established target loads and broad allocation  Allocated by state  States implement by county then local 4
  5. 5. © 2016 McNees Wallace & Nurick LLC www.mwn.com Municipal Storm Water Permitting  Changes to Municipality Authorities Act  Act 68 of 2013 – amends the MAA to explicity permit the creation of an authority for the purpose of “storm water planning, management and implementation” as defined by the articles of incorporation  Act 68 also gave retroactive blessing of any authority that was operating storm water controls as part of a combined water/sewer/flood control project. 5
  6. 6. © 2016 McNees Wallace & Nurick LLC www.mwn.com Municipal Storm Water Permitting  Changes to Municipality Authorities Act  Act 123 of 2014 – further amends the MAA to explicitly permit the imposition and collection of “reasonable and uniform rates” in connection with the performance of storm water planning, management and implementation  Rates must be “reasonable and uniform” and based in whole or in part on property characteristics, which may include installation and maintenance of best management practices approved by authority 6
  7. 7. © 2016 McNees Wallace & Nurick LLC www.mwn.com Municipal Storm Water Permitting  Storm water fees are most often (80%) based on the impervious area on a parcel of land  Impervious area – buildings, pavement, or other material impeding the natural infiltration of surface water into the soil, (e.g. parking lots, rooftops, driveways, etc)  In addition to area-based fee, storm water program may also include a separate billing and collection charge 7
  8. 8. © 2016 McNees Wallace & Nurick LLC www.mwn.com Municipal Storm Water Permitting  Two basic rate structure options  Flat Fee – Simple per-parcel fee for all  Dual Fee – Separate fees for Non-Residential and Residential o In dual-rate situations, Residential parcels typically pay a flat fee o Non-Residential parcels may pay a higher flat fee or a fee based on the individual parcel area, as determined by Geographic Information System (“GIS”) measurements 8
  9. 9. © 2016 McNees Wallace & Nurick LLC www.mwn.com Municipal Storm Water Permitting  More detailed variants  Equivalent Residential Unit (“ERU”) o ERU = average impervious area for a single family residential parcel  Equivalent Hydraulic Unit (“EHA”) o EHA = combined impact of impervious and pervious areas  Tiered – Separate flat fees for multiple ranges of impervious area  Development – Fees based on sliding scale from vacant/light development to heavy development  Runoff-based – Fees based on estimated runoff flows, with a higher per-unit rate for impervious area and a lower rate for pervious area 9
  10. 10. © 2016 McNees Wallace & Nurick LLC www.mwn.com Municipal Storm Water Permitting  Example – Philadelphia Water Department Storm Water Rate Structure  Rate Based on Runoff Factor o Residential customers pay uniform fee based on the city-wide average Impervious Area (“IA”) and average Gross Area (“GA”) for Non-Residential parcels o Non-Residential Customers pay a per sq. ft. fee for total parcel GA and an additional per sq. ft. fee for total parcel IA o <5,000 sq. feet = estimated IA (25% IA for undeveloped lots, 85% IA for developed) o >5,000 sq. feet = GIS-mapped IA and GA 10
  11. 11. © 2016 McNees Wallace & Nurick LLC www.mwn.com Municipal Storm Water Permitting  Why Should I Create a Storm Water Authority?  Take advantage of ability to impose storm water fee to defray cost of new regulatory requirements  Regionalization – use as vehicle to build a multi- jurisdiction solution  Liability Isolation – transfer responsibility to implement plan to separate entity  Monetization – opportunity to leverage existing municipal assets held by municipality during formation of new entity 11
  12. 12. © 2016 McNees Wallace & Nurick LLC www.mwn.com Municipal Storm Water Permitting  Do I Have to Form a Storm Water Authority?  Boroughs are currently authorized to operate facilities for the infiltration, detention or retention of storm water and for other methods of storm water management authorized by DEP  Ability to pay for such operation is limited – and tied to the special assessment process under Article 21A of the Borough Code (can only assess benefited properties)  No authority to impose a broad storm water management fee like in the MAA 12
  13. 13. © 2016 McNees Wallace & Nurick LLC www.mwn.com Municipal Storm Water Permitting  Do I Have to Form a Storm Water Authority?  House Bill 1394 – would expand Borough authority to plan, manage, implement, construct and maintain storm water facilities  Would authorize Boroughs to impose storm water fees similar to fees that may be imposed by municipal authorities  Explicitly permit fee to be charged to every property owner, or select property owners benefiting from the project 13
  14. 14. © 2016 McNees Wallace & Nurick LLC www.mwn.com Municipal Storm Water Permitting  Do I Have to Form a Storm Water Authority?  HB 1394 is not a revenue raiser – fee must be limited to cost to meet minimum regulatory requirements  Similar bills have been introduced that apply to first class townships (HB 1661) and second class townships (HB 1325)  HB 1394 was approved in House in December 2015, still pending in Senate after several markups 14
  15. 15. © 2016 McNees Wallace & Nurick LLC www.mwn.com Municipal Storm Water Permitting  Litigation Over Storm Water Fees Generally Concerns Two Issues:  Statutory/Regulatory Authority to Form Storm Water Utility  Distinction between fees properly collected by the utility and taxing power limited to the state  Although many municipalities have created storm water utilities without litigation, some have faced significant legal challenges 15
  16. 16. © 2016 McNees Wallace & Nurick LLC www.mwn.com Municipal Storm Water Permitting  Statutory Authority to Establish Storm Water Utility  Northeast Ohio Regional Sewer Dist. V. Bath Twp., 44 N.E.3d 246 (Ohio 2015) o Supreme Court of Ohio rejected Bath Township’s allegation that the Northeast Regional Sewer District lacked statutory authority to implement a storm water management program and collect storm water fees. o The court found the governing statute defined “wastewater” to include stormwater, thereby authorizing the Sewer District to regulate and assess fees for both services. 16
  17. 17. © 2016 McNees Wallace & Nurick LLC www.mwn.com Municipal Storm Water Permitting  Fee v. Tax  City of Lewiston v. Gladu, 40 A.3d 964 2012 ME 42 (Me. 2012) o Supreme Court of Maine found the City of Lewiston’s storm water assessment charge to be a valid fee and not a tax o Court applied the following four-factor test: o Regulatory Purpose or Revenue Generator? o Direct or Indirect Relationship between Fee and Benefit? o Voluntary or Involuntary Fee?  Court found credit program allowing for 100% fee reduction conferred voluntariness o Fair Approximation of Costs and Benefits? 17
  18. 18. © 2016 McNees Wallace & Nurick LLC www.mwn.com Municipal Storm Water Permitting  Fee v. Tax  Jackson County v. City of Jackson, 836 N.W.2d 903 (Mich. Ct. App. 2013) o Court of Appeals of Michigan found the storm water management charge implemented by the City of Jackson met no regulatory purpose and was intended primarily to increase revenue o Court also found the charge did not reflect usage of the storm water sewer system and therefore constituted a tax for the public benefit rather than a fee for services rendered 18
  19. 19. © 2016 McNees Wallace & Nurick LLC www.mwn.com Contact Information Tim is a public finance and tax attorney at McNees. He is a member of the Firm’s Public Finance Group and also practices in the Corporate & Tax, Public Sector, and Public-Private Partnerships groups. Tim has spent his entire legal career advising clients in matters related to state, local and federal taxation. He advises banks and financial institutions, governmental issuers, school districts and nonprofits on the structuring of taxable and tax-exempt revenue bond and general obligation bond financings for a variety of capital projects, including manufacturing facilities, hospitals and other health care facilities, parking facilities, schools and higher education institutions and water and sewer projects. He has also advised both the buyers and sellers of public assets in the context of public-private and public-public partnerships. Tim writes extensively on matters of interest to the tax-exempt bond community, and has authored articles for publication in a variety of sources, including The Legal Intelligencer. He regularly speaks on topics of municipal finance and tax law at seminars sponsored by various state organizations, including the Pennsylvania State Association of Boroughs, the Pennsylvania Municipal Authorities Association, and the Pennsylvania Bar Institute. 100 Pine Street T 717-237-5462 thorstmann@mcneeslaw.com Timothy J. Horstmann, Esquire Financial Services and Public Finance Group Harrisburg, PA 17101 100 Pine Street T 717-237-5290 abakare@mcneeslaw.com Ade Bakare, Esquire Energy and Environmental Group Harrisburg, PA 17101 Ade practices in the firm’s Energy and Environmental practice group. His practice focuses on issues involving electric, natural gas, communication, and water utility services. Ade represents large industrial and commercial consumers of these services before state and federal administrative agencies. Ade also counsels several municipalities on energy matters. Prior to joining McNees, Ade served as a prosecutor in the Pennsylvania Public Utility Commission’s Bureau of Investigation and Enforcement. As a PUC prosecutor, Ade participated in litigation and settlement negotiations concerning utility base rate filings, merger and acquisition applications, electric transmission line siting applications, and natural gas pipeline siting applications.

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