Dire Budget Could Make Stormwater Fee Hike Attractive
Tuesday, Feb. 24, 2009 | With the city facing a multimillion-dollar budget gap that could grow considerably in future years, city leaders could look to raise revenue through a fee aimed at preventing pollution of local waterways.
The city’s current stormwater fee raises only a fraction of the money the city spends to comply with government regulations to prevent stormwater pollution. If city officials pursue an increase, they could raise about as much revenue as a much more prominent option, repealing the People’s Ordinance of 1919, which prohibits charging for trash pickup at single-family homes.
A stormwater fee increase would face similar hurdles: a tax-averse population, mistrust of public officials and a recession.
But the city’s stormwater costs have more than tripled over the past few years, now consuming a larger portion of the city’s day-to-day budget at a time when tax revenues are expected to grow minimally, if at all, and other liabilities are rising. The stormwater fee is one of the few tax increases, along with the trash tax, that could raise big-ticket revenue for the city.
While a stormwater fee hike at some point hasn’t been ruled out, Mayor Jerry Sanders said he’s focused on balancing the budget by downsizing employee benefits.
“Right now, until we balance out the pension issues and balance out the benefit issues, I don’t think the public’s going to be in any mood to vote for any tax increases,” Sanders said. “That’s something we understand they’d have to vote for. There’s no sense in taking it out (for a vote) when they think every dollar they pay into that is going to go to the pension costs.”
In any case, it would be too late to get a fee increase on the ballot this year, with the state expected to schedule a special election for May.
The city has said it expects a budget shortfall of between $42 million and $54 million for the budget year beginning July 1. But the city’s budget crunch is expected to persist.
For one thing, if the financial markets don’t rebound by the summer, the city’s annual pension contribution will increase significantly in the 2010-11 budget year. Pension officials said if the market remains where it is now, the city’s pension contribution for the 2011 fiscal year could reach $250 million, about $100 million more than the 2009-10 budget year. That could severely exacerbate the city’s budget shortfall and ramp up pressure to increase revenue.
The city now charges a 95-cent monthly stormwater fee for single-family homes and a fee of 6.47 cents per 100 cubic feet for commercial properties. That’s expected to raise about $6 million in the upcoming budget year, of which $5 million will go to the storm water department. The department has an annual budget of $43 million, most of which comes from the general fund. When the costs of the program increase, they are picked up by the general fund, the day-to-day budget that pays for such things as public safety, libraries and parks.
Those expenses have increased since 2006, when the city spent $13 million on stormwater-related expenses, in part because of increased federal regulations that carry penalties if the city doesn’t comply. The department’s responsibilities include sweeping streets, inspecting industrial sites, and coordinating a public education campaign.
The idea of putting a stormwater fee increase on the ballot was kicked around two or three years ago, but was put on the back burner when the economy took a downturn, said Bruce Reznik, executive director of San Diego Coastkeeper.
Reznik said city leaders have been looking at a possible increase. “But when you consider that San Diego is an anti-tax city to begin with, with no faith in city leaders, you’re looking at a pretty toxic environment to bring a ballot initiative,” he said.
There’s also been talk of combining or coordinating a countywide stormwater fee hike with a county “quality of life” tax measure that could raise money for habitat preservation, shoreline preservation and water quality measures.
Reznik said San Diego’s program is being “held together with Band-Aids.” The department’s budget was cut by $5.7 million during last year’s budget cuts, leaving it with about the same amount of funding as last year. Funding is expected to remain flat, according to the mayor’s five-year financial outlook.
But Reznik said the program is critical because urban runoff is the top source of pollution of San Diego’s waterways. He also said it’s difficult to address because the problems are “so ubiquitous,” stemming from everyday activities such as pesticides running off people’s yards and carwashes letting soapy water run into drains.
Reznik said funding the bulk of stormwater pollution prevention from the general fund means the money for the program depends on the “whims of the economy” or the “whims of someone who’s making the budget.”
If the stormwater fee was hiked high enough to recoup the program’s expenses, those fees could pay for the city’s storm water pollution prevention efforts, presumably without dipping into the general fund.
“I think it makes a lot more sense to have a dedicated source of funding that you know is going to address this issue,” Reznik said.
Councilwoman Donna Frye said she’d be “open to discussing” a stormwater fee increase, but said the city needs to make corresponding cuts as well.
“It has to be part of a comprehensive solution that really addresses the problem,” Frye said. “Otherwise we’ll just keep coming back for more.”
If the city were to propose a fee increase, state law requires it to be approved by either a majority of the affected property owners or two-thirds of the general electorate. The fee could only be used to recover the costs of administering the program. The Independent Budget Analyst’s Office has estimated that could increase revenue by $38 million a year, roughly the same amount that a repeal of the People’s Ordinance could reap.
The IBA’s office has recommended the city find a funding source for the program, though not necessarily a tax hike. Tom Haynes, a fiscal and policy analyst in the IBA’s office, said other cities have taken other routes to fund stormwater prevention. For instance, Los Angeles included money for stormwater prevention as part of a bond measure approved by voters in 2004.
“Our view is unless we are able to secure a dedicated source of funding for that program, it has the ability to take up a greater and greater share of general fund resources,” Haynes said.
He said there is still some uncertainty as to how to structure a fee under the law. “I think the department and city is doing research on what the options are,” Haynes said. The stormwater department’s director and spokeswoman didn’t return calls for comment.
Some cities have run into trouble when they tried to impose the fees without voter approval. The Howard Jarvis Taxpayers Association has filed suit against Encinitas and Solana Beach, which both subsequently agreed to seek voter approval. Solana Beach voters approved a fee in 2007; Encinitas voters did not.
Tim Bittle, the association’s director of legal affairs, said cities that properly seek voter approval probably aren’t in danger of a lawsuit. But he said stormwater fees are often “a shell game.”
Often, he said, the federal law requires cities to do things they’re already doing anyway, such as street-sweeping, tree trimming and emptying public trash cans. San Diego’s stormwater department budget includes about $4 million for street sweeping, an amount that has remained relatively flat over the past few years.
When cities ask for a stormwater fee increase, those expenses are lumped in with the new things cities are doing to comply with the law. Bittle said that “pads” the stormwater fees and allows cities to charge higher fees to cover some services they were already providing.
Bittle said public officials typically frame a plea for stormwater fee hike by talking about unfunded federal requirements without specifying what services a new fee will pay for.
“It sounds logical to people,” he said, “until they peel back the propaganda and find this is a new fee to provide services that have always been provided for under the general fund to free up more money in the general fund for something else.”